Expenses you can claim for your business

As we embrace another new financial year. If you are a self-employed sole trader, every penny counts.

That’s why it’s important to know what expenses you are able to claim tax relief for.

It can be hard to manage your tax returns on top of your busy work schedule – but all self-employed sole traders are entitled to submit a yearly tax return to HMRC. It is worth checking the status of your expenses with HMRC if you are subject to IR35.

If you are looking for ways to keep hold of your hard-earned cash and save on taxes – read on.

There are a number of expenses that self-employed sole traders can claim tax relief for including:

  • vehicle insurance
  • repairs and servicing
  • fuel
  • parking
  • hire charges
  • vehicle licence fees
  • breakdown cover
  • train, bus, air and taxi fares
  • hotel rooms
  • meals on overnight business trips

Let’s look into these in more detail:

Business Vehicle costs

The upkeep of a work vehicle is not cheap, but if you’re a self-employed sole trader there are many vehicle costs that you can claim back on your tax return.

Allowable business expenses for self-employed people’s vehicles are only permitted for business related fuel, parking, repairs, servicing, breakdown cover and insurance. It’s important to note that this does not cover tradespeople for travel to and from work, speeding fines and non-business driving expenses.

For self-employed tradespeople, van insurance is a yearly expense that you cannot shy away from. Luckily, it’s on the list of expenses that you can claim back at the end of the tax year.

Repairs and servicing for vans is also seen as an allowable expense as it’s important to keep your van roadworthy and in good condition.

How many times do you fill up your fuel each week?

We bet it’s quite a lot, especially if you travel to multiple jobs throughout the day. It’s good to note that fuel is a legit expense that can be claimed for, permitted it is for business use only.

If you choose not to claim back the running costs of your business vehicle, you can opt for a simpler method. You can claim for 45p per mile for the first 10,000 business miles. If you go over this threshold, the remaining miles can be claimed at a rate of 25p.

Parking charges (as long as you are parking for business use) are also eligible tax expenses that HMRC see as a legit claim – meaning you no longer have to spend hours looking for free parking.

It’s crucial that you keep hold of any VAT receipts for the above expenses that wish to claim for, as HMRC may request proof of spending.

Reasonable car hire charges are also on the list of expenses that self-employed tradespeople can claim for, although it must be used be used for business purposes and during the working week.

Vehicle licence fees and breakdown cover are also featured as claimable expenses.

Bear in mind that HMRC only accepts tax claims for vehicle and travel related costs that are directly related to business use. You cannot claim for commuting to and from work, nor can you put a speeding fine on your tax relief.

If you use traditional accounting and buy a vehicle for your business, you can claim this as a capital allowance.

If you use cash basis accounting and buy a car for your business, claim this as a capital allowance as long as you’re not using simplified expenses.

For all other types of vehicle, claim them as allowable expenses.

Travelling for work?

Expenses such as airfares, train tickets and ferries are also permitted to be claimed back, as long as they are used for business purposes.

We are referring to business related travel to various locations, some that may require you to stay overnight.

This benefits self-employed traders who are always on the move for work, and therefore don’t have a single base of operation.

If you travel away for work and need to stay overnight for a job, you can claim back your hotel stay cost.

And to top it off, whilst you’re working away – why not treat yourself to a nice evening meal? Because meals on overnight business trips are also a valid expense.

HMRC also accepts additional food and drink cost for when a person (such as a self-employed tradesperson) works in various locations each week.

What about work uniforms and tools?

Self-employed tradespeople are able to claim tax relief on work related uniforms such as specialist wear e.g., safety boots, high-visibility jackets etc. You may also be eligible to claim for laundry costs and any uniform repairs.

Tools play a big part of a trader’s job and ultimately, they enable you to earn an income. It’s good to note that you are able to claim tax relief for repairing or replacing small tools you need to do your job (for example, scissors or an electric drill)

With the current situation, PPE has become a normality in our everyday lives. But unfortunately, self-employed traders are not able to claim tax relief for the cost of their personal protective equipment.

If your job requires PPE, your employee should provide this free of charge, or reimburse the cost accordingly.

These rules act as a solid guide for tradespeople who are nearing their tax return, but they are complex, and we recommend seeking advice from a qualified accountant to make sure your return is a smooth process.

Useful Links

Self-Assessment Tax Return Deadlines

https://www.gov.uk/self-assessment-tax-returns/deadlines

Penalties

https://www.gov.uk/self-assessment-tax-returns/penalties

If you are ever unsure. Speak to your financial speak to your financial wizard.

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