Updated: Feb 24
Everyone gets confused by what you can and cannot claim for in Business Expenses, so I thought I would write this quick blog with a downloadable PDF list which will include some of the things you can claim for.
Be aware, there are slightly different rules on claiming expenses, if you are self-employed or running a Limited Company.
As a sole trader, you can deduct some of your running costs to work out your taxable profits as long as they are allowable expenses.
For example if your turnover is £20,000 but you have £5,000 allowable expenses then you will only pay tax on the remaining £15,000.
That shows you how important the allowable expenses are.
If you are a Limited Company the expenses are slightly different. You can deduct any business costs from your profits before tax and you must report any item you make personal use of as a company benefit.
You can find more information on company benefits, here:
Whether you are a sole trader or have a Limited Company, it is important you record all your expenses and keep a copy of the receipt. The best way to store your receipts, is to either scan them or take a picture so you can store them electronically. When you are scanning or taking a photo of the receipt, make sure the receipt is readable, ensuring all the information has been captured so if you are audited by the HMRC they can check the receipt is genuine.
With accounting software like Xero, Quickbooks or FreeAgent for example, you can upload your receipts easily with an app on your phone making it very easy to be reconciled with the relevant bank transaction, nowadays it is so simple to keep track of your expenses. Personally I do also like to keep a copy on my GDrive only then do I feel safe to destroy the paper copy. Some people do like to keep the paper copies but you really do not need too but if you do wish to then I would suggest you photocopy them onto A4 paper so that you can fit 4 or 5 receipts on to one sheet to make them easier to file in a folder. However you chose to store your receipts is totally up to you, just make sure they are kept safely. One thing I do recommend is that you spend time at least once a month to reconcile your business accounts, if you are a person who hates bookkeeping or you just do not have time to do this task then outsource to a bookkeeper, keeping good records of your accounts is vitally important, and it is not something you can ignore so make sure you do not keep putting it off.
It is important you keep your receipts, whether they are in electronic or paper form for 5 years if you are a sole trader and 6 years if you are Limited Company so make sure you have a good system and stick to it.
The expenses you can claim for are:
Office costs, for example stationery or phone bills
Travel costs, for example fuel, parking, train or bus fares
Clothing expenses, for example uniforms
Staff costs, for example salaries or subcontractor costs
Things you buy to sell on, for example stock or raw materials
Financial costs, for example insurance or bank charges
Costs of your business premises, for example heating, lighting, business rates
Advertising or marketing, for example website costs
Training courses related to your business, for example refresher courses
Click here to download a more detailed list of Expenses from my digital shop, don't worry it is completely FREE: Business Expense Download
Claiming expenses for working from your own home.
If you are using your home to work from, like I do, then you can claim a proportion of housing costs.
You’ll need to find a reasonable method of dividing your costs, for example by the number of rooms you use for your business or the amount of time you spend working from home.
Because I have 6 rooms and work at home full time, I divided my monthly household bills by 6 because I use 1 room in a 6 roomed house. I then charge that to my business as rent, you can charge it annually or monthly, I like to take the money from my business each month.
If you have 4 rooms in your home, one of which you use only as an office. Your electricity bill for the year is £400. Assuming all the rooms in your home use equal amounts of electricity, you can claim £100 as allowable expenses (£400 divided by 4). If you worked only one day a week from home, you could claim £14.29 as allowable expenses (£100 divided by 7).
I hope this blog as been of some help to you, and remember if you are struggling to do all your must do admin then please have a look through the rest of my website and book a call if you would like a FREE no-obligation chat.
Just click on the picture to schedule a call.
Heidi - Virtual Assistant
Keeping your Books Ltd
Check out my other blog on Starting a New Business - Limited Company vs Sole Trader