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EXPENSES & ALLOWANCES - SELF EMPLOYED

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Guide to Self Employed Expenses

Expenses must relate to the running of your business.

  • Allowable / Non Allowable Expenses (Table 1)


    Category Allowable expenses
    Non allowable expenses
    Accountancy, legal & other professional fees.
    Accountants, solicitors, surveyors, architects.
    Legal costs of buying property. Costs of settling tax disputes and fines.
    Advertising & business entertainment costs.
    Advertising in newspapers, directories & website costs.
    Entertaining clients, suppliers & customers; hospitality at events.
    Bank, credit card & other financial charges.
    Bank, overdraft, credit card charges, HP interest & leasing.
    Repayment of the loans or overdrafts or finance arrangments.
    Car, van & travel expenses.
    Car & van insurance, repairs, servicing, fuel, parking, RFL, business travel & subsistence.
    Non business motoring costs (private use proportions). Costs of buying vehicles. Travel costs between home and business.
    Communications, stationery & other office costs.
    Phone, mobile, internet, postage, stationery, printing, office equipment, software.
    Non business or private use proportion of expenses.
    Construction industry payments to subcontractors.
    Construction industry payments to subcontractors. (before taking off any tax)
    Payments for non business work.
    Cost of goods that you are going to sell.
    Cost of goods bought for resale.
    Cost of goods or materials bought for private use.
    Depreciation & loss/profit on sale of assets.
    Depreciation & loss/profit on sale of assets are not allowable expenses
    Depreciation of equipment, cars etc. Losses on sales of assets
  • Allowable / Non Allowable Expenses (Table 2)


    Category Allowable expenses
    Non allowable expenses
    Insurance policy. Costs of any business
    specific policy.
    Recoverable costs.
    Interest on bank and other business loans. Interest on bank and other
    business loans.
    Repayment of the loans or
    overdrafts, or finance
    arrangements.
    Irrecoverable debts written off. Amounts included in turnover but unpaid and written off because they will not be recovered. Debts not included in
    turnover; general bad debts.
    Other business expenses. Trade journals and subscriptions; other sundry business
    running expenses not
    included elsewhere.
    Payments to clubs, charities,
    political parties etc.; non
    business part of any
    expenses; cost of ordinary
    clothing.
    Rent, rates, power and insurance costs. Rent for business premises, business and water rates, light, heat, power, property insurance, security; use of home as office (business proportion). Costs of any non business part of premises; costs of
    buying business premises.
    Repairs and renewals for property and equipment. Repairs and maintenance of business premises and
    equipment; renewals of small tools and items of
    equipment.
    Repairs of non business
    parts of premises or
    equipment; costs of
    improving or altering
    premises and equipment.
    Wages, salaries and other staff costs. Salaries, wages, bonuses, pensions, benefits for staff or
    employees; agency fees,
    subcontract labour costs;
    employers’ NICs etc.
    Own wages and drawings,
    pension payments or NICs;
    payments for non business
    work.

The general rule is that a self employed person cannot deduct expenses unless they are ‘wholly and exclusively’ laid out for the purposes of the trade, profession or vocation. Two tables of the most common allowable and disallowable expenditure are shown above (Tables 1 & 2).

Motoring expenses - If you use a car both for business and privately, you can claim a proportion of the running costs in the ratio of your business mileage to your total mileage. You must keep a log of business mileage as well as copies of all bills/receipts to calculate the appropriate deduction. You can alternatively use a fixed rate per business mile to compute vehicle expenses instead of keeping detailed records of actual expenditure. This method is available if the annual turnover of a business is less than the VAT registration threshold.

Use of home as office - Where a room at home is used wholly and exclusively for business purposes, a deduction may be claimed for a portion of: insurance, council tax, mortgage interest, rent, repairs and maintenance, cleaning, heat, light and power, broadband and telephone.

Administrative costs, including mobile phone - You can deduct the administrative costs of running your business, including advertising, stationery, postage, telephone and fax.

Disallowed  expenses - Some expenses are never allowable for tax purposes, for example, entertaining clients, even if such entertainment directly led to new business.

Registered office: 61 Friar Gate, Derby, Derbyshire, DE1 1DJ

Adrian Mooy & Co is the trading name of Adrian Mooy & Co Ltd.  Registered in England No. 05770414

Registered to carry out audit work by the Association of Chartered Certified Accountants - auditregister.org.uk 8011438

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61 Friar Gate - Derby - DE1 1DJ

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