Many people who are new to being Self-Employed or running a business (even those who have been in business for many years in fact!) will always ask me the question “can I claim this back in my tax return?” or “is this a taxable expense?”.
Well my friends I’m here to finally answer the question of what can be claimed for in your business. Now, this isn’t going to be a long list of “can’s” and “can’ts” – if that’s what you’re looking for then head over to here – https://www.gov.uk/expenses-if-youre-self-employed and you can also download the HMRCs list of expense categories explained here – https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/367279/expenses-allowances.pdf
Anyhoo! Back to the blog.
So for me, there are 3 things to remember when looking to claim back any expense:
1: Can your business run without this expense?
The first rule of claiming any expense is to ask yourself “Can my business run if I don’t buy this?” if the answer is “no” then you can claim that expense!
If the HMRC ever audit your accounts then you have to have a reason for everything you’ve ever claimed against your tax so everything you claim must be for the purpose of either bettering your business or simply because your business couldn’t run without it.
So let’s take an example, if your printer has broken and you need one to print invoices/receipts etc then your business couldn’t run without this machine and would definitely be a taxable expense. Simple!
2: Percentage for Business use
Not all things are straightforward with claiming expenses, for example if you work from home then you are completely within your right to claim back utility bills etc. However you must calculate how much of that bill is for business use – e.g. if you’re claiming back an electricity bill because you work from home then (generally) evenings and weekends etc aren’t claimable since you’ll be using the electricity in your home for personal use during that time.
To calculate the percentage of business use for any expense just check out my other blog here which gives you a simple equation and breakdown – https://zlogg.co.uk/how-to-calculate-percentage-of-business-use/
3: Expense Categories
With any expense you are going to have to assign it a category for the purpose of your tax return at the end of the year, so it’s always good to keep these headings in mind when purchasing something just to make sure it definitely falls within the HMRC’s guidelines. If you honestly can’t put an expense under any of the following categories then you probably shouldn’t be claiming it:
- Accountancy, Legal and other professional fees
- Advertising and business entertainment costs
- Bank, credit card and other financial charges
- Car, van and travel expenses
- Communications, stationary and other office costs
- Construction industry – payments to subcontractors
- Cost of goods that you are going to sell or use in providing a service
- Deprecation and loss/profit on sale of assets
- Insurance policy
- Interest on bank and other business loans
- Irrecoverable debts written off
- Rent, rates, power and insurance costs
- Repairs and renewals for property and equipment
- Wages, salaries and other staff costs
And that’s it! It’s honestly not too hard to know whether something is a claimable expense or not, it really just comes down to common business sense. My final advice would be to always think “will my business be able to run if I don’t buy this?” if the answer is no then you can claim that expense.
I hope that helps and if you want anymore information just contact me at firstname.lastname@example.org
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