If you are a sole trader, the expenses you can claim are subject to complex rules. We recommend consulting a Chartered Accountant before submitting your accounts. The following points can however provide general guidance.
Do you work from home?
Did you know that as a sole trader, you can charge a proportion of household expenses to your business. The following expenses will need to be logged effectively to best support your books and tax return.
Telephone & Broadband
You should monitor and log the number of calls you make, which are personal, and business related, or log how many hours your broadband is used for business purposes against your broadband / phone’s total usage. Adopting this approach will give you a robust method of apportioning your business / private usage.
General household expenses
These are harder to monitor. Plus, if you dedicate part of the home you work from, you will need to consider whether there might be a Capital Gains implication, should you choose to sell your property in future. The simplest method here is for you to work from home on a non-exclusive basis and charge £4 per week to your business. It’s not just the accrued expenses whilst working from home that you can expense (claimed against tax), other business expenses can be considered too.
Your ongoing hosting costs are tax deductible; however, the actual cost incurred in development is capital expenditure. And, there might be occasions when such expenditure might qualify for R & D credits.
Advertising, PR and marketing
Other advertising, PR and marketing costs are also business expenses, but business entertainment is not tax deductible.
HMRC’s approved mileage rates make it easy for you to claim your travel costs. Car travel is calculated at 45p per mile for the first 10,000 miles, and then 25 per mile after that threshold has been met. Motorbikes are 24p per mile and bikes are 20p per mile. This only applies for your business related journeys and not your mileage to and from work.
Business insurance policies
Expenditure on your professional indemnity, public liability insurance etc. is a fully allowable as a tax deductible expense.
While courses to keep your skills up to date are tax deductible, retraining and courses to acquire completely new skills, are not.
Fees for other business services
Expenditure on your lawyer or accountant is sometimes allowable for tax purpose. For example, in respect of the renewal of a lease or the preparation of year end accounts support. However, there can be other times when the expense incurred is not eligible to be treated as an immediate tax write off. For example: your legal fees when incurred while acquiring a new lease, or your accountants’ costs incurred in the preparation of a personal tax return.
Business related subscriptions
Business related subscriptions such as magazines, trade papers, and your payment for certain recognised professional organisations etc. are tax deductible.
To best support your tax return, always keep hard or digital copies of your receipts. There are numerous apps available which allow you to capture images of your receipts and store for such purposes.