Every year, millions of self-employed people miss the opportunity to make tax savings, resulting in more of their hard-earned cash falling into the pockets of HMRC.
For self-employed people, there are many business expenses that can be claimed back so long as they are exclusively business-related and justifiable to HMRC. Some are more well-known than others - here, we list five allowable expenses that are commonly overlooked.
1. Phone usage
If you use your personal mobile phone for work, then you’re able to claim back some of the money you spend on the bill. The amount you claim back needs to be a reasonable estimate of how much of the bill is actually related to your work.
An easy way to calculate this is to gauge what percentage of the time you spend on your phone is work-related, and then multiply this by the total phone bill. Remember that this relates to costs associated with using mobile data as well as messages and calls.
2. Working from home
If you conduct business activity from your place of permanent residence, there are a number of often-overlooked costs which you can claim. For example, in the same way that you can expense costs related to mobile phone use, you can also claim for bills relating to your landline, broadband, or home wifi - as long as you use them for work.
The list of home-related expenses doesn’t end there. Based on the amount of space in your home used for business purposes, you can also claim a proportional amount of rent, utility bills and council tax.
The GOV.UK website contains an exhaustive list of what you could claim as part of working from home.
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3. Business trips
From a tax perspective, business trips can be tricky for self-employed people, as being outside your usual working environment can make knowing the rules related to expenses more difficult than normal.
The good news is that in reality, the rules are quite straightforward. So long as the journey being undertaken is not part of your regular working day, all costs related to travel - regardless of whether you go by train, plane, bus or car - can be claimed. The same goes for accommodation, which means that that a hotel room is fine to expense.
But where do you draw the line? Is the room with the single bed okay, but the double too extravagant? The key here is to ensure you act within the realm of what HMRC would label as necessary. This requires a personal judgement, but as long as you can justify it, you’re in the clear.
There are certain expenses related to ensuring you’re at the forefront of your chosen profession which can also be claimed in full. For example, any business training that is necessary in order to conduct a profession properly - such as First Aid training as a lifeguard - can be expensed entirely.
The same is true for training that is business-related but less ‘necessary’ to the profession at hand, such as having an external trainer come to your place of work to deliver professional coaching or mentorship.
5. Meals (but not entertainment)
They say there’s no such thing as a free lunch. Unfortunately that’s mostly true from HMRC’s perspective as well, which is why any purchases relating to food or drink that are part of your normal working routine cannot be claimed.
That said, any meal-related expenses which fall out of this definition, but which are still wholly and exclusively for the purposes of trade, can be considered an allowable expense. For example, picking up lunch at an all-day business convention passes the test.
Entertainment, such as purchasing tickets to a show for a client, is not considered to be an allowable expense for tax purposes.
Getting a helping hand
With such busy working lives, it’s easy to forget the odd expense. But these can add up, and before you know it your tax bill can end up far higher than it should be.
With Coconut, you’ll get useful tips on what you can and can’t claim as you spend, helping you to maximise your tax savings with confidence. We also automatically sort all of your business expenses on the go, so you don’t have to worry about them later.
To make sure your expense claims are reasonable, and to prevent the risk of being penalised by HMRC, we recommend you speak with an accountant for guidance.
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