I'm self-employed - what expenses do HMRC let me claim for tax purposes?

If you're self-employed — for example a sole trader, freelancer or a contractor — you’ll need to complete a self-assessment tax return each year to HMRC and pay income tax on your taxable income, which will be your profits plus income from other sources.

Your profit is based on your income less allowable business expenses - the more the profit, the greater the tax and vice versa. So it's important to claim what you're entitled to (and not what you're not entitled to!), and many taxpayers miss things off.

untied guides you through the process of claiming allowable expenses and you can file your tax return directly from the untied app. Learn more about untied

What is an allowable expense?

There are rules that HMRC sets out based on legislation on what an allowable expense is. In general, to be able to claim expenses (which reduces your profit, and therefore your tax), these must be costs that are for business purposes only — things like office equipment, staff and training costs.

They should also be “wholly and exclusively” for your business. Personal expenses are costs not directly associated with your business and are not considered to be allowable expenses. It means you can’t claim everyday clothing or lunch (unless, for instance you’ve gone away to a conference outside your usual routine).

By practice, for some costs which have both business and personal purposes – for instance internet broadband costs and your mobile phone - you can claim an allowable expense for the business part of the cost. Unless the personal use is totally incidental, HMRC expects you to use a reasonable method to divide these costs between personal and business.

Allowable expenses can also include several things that you may be unaware of including legal and financial costs, marketing costs and subscriptions.

Here’s a quick reference table below to help you determine whether an expense is ‘allowable’ – and can be used to reduce the amount of tax you pay - or not. If you use untied, you’ll simply tag these as "business expenses” as you go.

Self-employed allowable expenses list – at a glance:

And now in more detail. What can you claim as self-assessment expenses?

Business premises / office expenses

All your office costs – typically those that are used for two years or less - can be claimed. That includes

• office furniture and equipment
• printing, postage, stationery, printer ink
• IT costs (eg any annual maintenance contracts, repairs and software costs)
• Phone and broadband costs
• Office /factory space / property rent
• Security costs
• Work location overheads (including heating, lighting, water rates, business rates)
• Repairs and maintenance

Working from home

If you work from home, you can claim either a business proportion of your costs of electricity, gas and other utilities . The easiest way to do this is via fixed rate according to how much you’re working at home. If you're on untied Pro, we'll help you do this with a quick wizard. You can also claim a share of your broadband internet bill.

Building an office extension is not an allowable expense as this is adding value to your house …😊

Travel expenses

Business travel costs are allowable expenses – you can’t claim to and from a usual place of work.

Vans, cars, motorbikes and bicycles

If you have a vehicle that is used in your business, you can claim expenses for this. Most self-employed people will be using their own private vehicle for business purposes (untied tip - make sure that your insurance covers you!). In this case, you can claim for business mileage (most users find that a mileage rate is the easiest way to claim for these costs) or claim the business proportion of the costs (noting that there are special rules for cars). For more information on this, go to our helpful car, mileage and fuel article and our tax tea break video below on claiming fuel or mileage.

Tax relief can also be claimed for the business proportion of:

• parking costs
• congestion charges.

Professional, legal and financial costs

Legal and other professional fees can count as allowable business expenses. You can deduct costs for:

• accounting software fees (like untied) – see our tax tea break video below
• professional advisers including if you use an accountant alongside untied
• professional indemnity insurance premiums, employee liability and other general business insurances
• bank, overdraft and credit card charges
• interest on bank and business loans
• hire purchase interest
• leasing payments
• alternative finance payments, for example Islamic finance

You cannot deduct:

• fines or penalties (like parking fines)
• other fines for breaking the law
• your income tax, national insurance contributions – see our tax tea break video below
• your pension costs
• self-assessment penalties and interest (but untied helps you avoid these!)
• self-assessment tax payments to HMRC

Marketing, subscriptions and entertainment

You can deduct allowable business expenses for some marketing and subscription costs as part of your allowable expenses. These include:

• advertising in newspapers or directories
• bulk mail advertising (mailshots)
• free samples
• website costs
• trade or professional journals
• trade body or professional organisation membership if related to your business

You cannot deduct:

• entertaining clients, suppliers and customers
• event hospitality
• payments to political parties
• gym membership fees
• donations to charity - but you may be able to deduct sponsorship payments

Clothing

The cost of clothing that is not part of an ‘everyday’ wardrobe can be deducted against your income. This would include uniforms for the police and nurses for example. Clothing with an embroidered company logo would also fit the uniform definition. Plus PPE, protective clothing and the costs of clothing acquired for a film, stage or TV performance and film premieres.

Staff costs

Staff costs are one of the main, if not the main, cost for many businesses. In general the costs associated with employing staff can be treated as expenses. The general rule is that for business expenses to be deductible they must be incurred wholly and exclusively for the purposes of the business. This will include:

• bonuses
• pensions
• benefits
• agency fees
• subcontractors
• employer’s national insurance
• training costs to maintain your and your employees' expertise

Reselling goods

You can also deduct as expenses:

• items you resell, such as stock
• raw materials that you use to make your products
• direct costs of producing goods

Just like with other expenses, you cannot deduct the cost of items you initially bought for personal use but are looking to sell. You are also unable to deduct the depreciation expenses of equipment you own and are looking to sell.

A free lunch?

You cannot deduct private expenses or everyday food or snacks. See our tax tea break video below which explains why. 

If you're outside your normal place or pattern of work, you may be able to claim "reasonable costs" for food and drink which relate to your business. It may cover meetings and conferences and so on, as well as the cup of coffee you get on the train to get there.

untied tip if your expenses are less than £1,000

Expenses are only worth tracking if they are greater than £1,000 a year ... the reason is that you're allowed to claim up to £1,000 as an allowance without needing paperwork. If you're an untied user then the trading allowance is claimed automatically if your actual expenses are lower.

There is one thing to note - you can't create a loss by doing so ... it means that if you're earning £5,000 you can deduct £1,000. If you're earning £800, you can deduct £800.

Running a business is expensive. Thankfully, deducting allowable expenses can alleviate some of the financial pressure that goes hand in hand with being self-employed. By staying organised and keeping accurate records of your expenses – you can do this easily through untied - submitting your allowable expenses returns to HMRC should be a breeze. Sign up here!

And for more useful information, click here to find out what the difference between being a sole trader and a limited company is.