It is important to understand that you cannot proceed and subtract your costs on your own. HMRC has clear rules about what you can and cannot take into account, so the allowed expenses are known to the costs that you can include in your calculation.
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By defining the allowed costs, HMRC tries to ensure that it only deducts the costs that are closely related to your business. It is important to understand which of your own expenses are allowed and calculate your earnings accurately to ensure that you pay the correct amount of taxes.
Here is an example:
Your company earns £ 25,000 in a fiscal year, but it’s allowed costs are up to £ 5,000. You only have to pay taxes on £ 20,000 that is your taxable benefit.
What are the self-employed costs allowed as costs?
Upon completing your tax return, these are part of the costs normally incurred as allowable business costs.
It can include commercial stationery, printing costs (including printer ink) and shipping costs. It may also include commercial equipment such as computers and printers and computer software, but you may have to claim them as capital allocations if you do not use cash-based accounting.
You can claim rental, maintenance and repair costs, utility bills, property insurance and security. You cannot claim the purchase or construction of a commercial premises. If you run your business from your home, you can include some of your home utility bills, but you must calculate the percentage of your home used for the business, and what proportion of the month is used for commercial purposes. . If you work from home at least 25 hours a month, you can use the ‘simplified expenses’ expenses, which is a fixed monthly rate calculated by the government.
It can include vans related to cars or businesses, including vehicle insurance, fuel, rental charges, repairs, services and breakdown coverage. This can be difficult to calculate, so you can use “simplified” vehicle costs, which a flat rate is provided by the government. It can also include business trips in train rooms, buses, airplanes or taxis, and hotels and meals during night business trips. Remember that trips for meetings, site visits, etc. are included. Also note that if you make a trip for personal and business reasons, you must be able to separate the cost of the business to include it. You cannot claim entertainment for customers, suppliers and customers, or event hospitality.
Stock and materials
You can take into account the cost of your stocks, raw materials and direct costs derived from the production of your goods.
Legal and financial costs.
If you need to hire a professional as an accountant, lawyer, land surveyor or architect for commercial reasons, you can include the cost in your calculation. It may also include bank charges, overdrafts and credit cards, interest on bank and commercial loans, installment interest and lease payments. Note that if you are using cash accounting, you can only claim £ 500 in interest and bank charges.
It may include the cost of commercial insurance, for example, civil liability insurance and professional indemnity insurance. More information on this can be found on our frequently asked questions pages.
Marketing costs can be claimed, which include newspaper advertising, directory listings, postal checks, free samples and website costs.
It can include the cost of the uniform, the essential protective clothing or the costumes of the actors or artists, but it cannot take into account the cost of the daily clothes that you spend.
Employee and employee salaries represent allowable costs, bonuses, pension contributions, benefits, agency fees and employer’s national insurance contributions.
You can include the cost of membership for commercial companies or professional membership organizations if they are relevant to your business, and the cost of subscriptions to commercial or professional journals.
Calculate your business expenses for your tax return
When you complete your tax return, you can get the option to give a figure of your allowable expenses or give a detailed breakdown. If you choose to enter a single figure, you must calculate all your costs accurately and keep a record of your work if HMRC investigates your figures. You must save receipts or other proof of purchase. You do not need to present them with your tax return, but you may have to file them if you are subject to a tax investigation.