That dreaded January 31st self-assessment deadline is approaching fast – but stop worrying! There’s nothing to fear. Your friendly self-assessment expert at Mad Hatters is at hand. All you need to do is pick up the phone and we’ll get you started, Today’ blog is a quick-and-easy way to get you kick-started.
As a sole trader, your business will, of course, incur running costs. The good news is that many of these can be claimed as business expenses – you’ll pay less tax and get to keep more of your hard-earned money.
The trouble is – the list of what you can and can’t claim for is always changing.
So – in this article, we’ll touch on a handful of the expenses you can claim.
And by the way – next month’s blog will be about the expenses you can claim as a Limited Company.
What is tax relief?
Every business expense you incur reduces your profit. So, more allowable expenses means less taxable profit and less tax to pay.
To account for your expenses properly, you need to keep accurate records of everything. Remember – by law, you have to keep these records for six years. HMRC could decide to investigate at any point within this time.
There are many grey areas about what is ‘allowable’ and what isn’t. This’s why, if you’re in any doubt, you should always check with a tax expert (could that be us? 😊)
So then – which expenses can I claim for?
You can only claim for expenses which you ‘wholly and exclusively’ incur in the performance of your duties.
When a particular expense has both personal and business elements, it often won’t be accepted, because you’d still be making the expense regardless of the business. There are exceptions. For example, if you work from home, you can claim for a proportion of heating and lighting expenses, for the room you actually work in.
How do I keep track of my business expenses?
It’s vital to keep a record of your expenses such as business mileage. Without the breakdown of journeys and mileage covered, HMRC could refuse your claim.
You can use a spreadsheet for this kind of record-keeping. But, these days, there are some amazing apps around for keeping expenses records. Call us and we’ll point towards the best ones.
If you’re working away, you can claim lunch costs if you work for five working hours. More than 10 hours, you can claim for dinner too.
You can claim on accommodation used when you’re travelling for business. But be reasonable. If HMRC sees that you’ve been staying at the Savoy, they might well query your claim!
Business mileage for sole traders
If you use your personal vehicle for business travel to a temporary work location you can claim the following rates –
|Vehicle||Rate Per Mile (On first
10,000 miles in tax year)
|Rate Per Mile (On each
mile over 10,000 miles)
|Cars and vans||45p||25p|
Make sure you keep up with a mileage log or again – there are some great apps you can use.
Fixed assets – equipment and office furnishings
This could be computers, printers, and software. You can also claim relief towards the cost of equipping/furnishing a business office, e.g. chairs, bookcases. Essentially, for anything you buy that you need for your business, you can claim tax relief.
Everyday office purchases
You can claim for all those little everyday purchases – from paperclips to computer consumables.
If you pay to belong to professional bodies or associations, you can claim.
Telephone and broadband expenses for sole traders
If you’re using a home or mobile phone line for both business and personal calls you can’t claim for line rental, because they aren’t exclusively for your business.
But – you can claim expenses for the business phone calls used on that line, provided you can identify them on the phone bill.
The same applies with Broadband.
Using your home as an office
If you work from home you can calculate your allowable home expenses.
This gets a bit complicated. You can choose to claim what’s called ‘simplified expenses for the self-employed’ or you can work out your actual costs. You do this by calculating the proportion of personal and business use for your home – in other words, how much of your utility bills are for business. Call us – we’ll help you to decide the best approach.
Training expenses for sole traders
The cost of any work-related training courses is claimable. Interestingly, you can’t claim if the training is designed to give you a new skill enabling you to branch out into new sectors or offer a new service.
Travel and subsistence expenses for sole traders
You can claim for travel expenses as long as it’s purely for business. This could be airfares, train tickets and ferries. Tolls, congestion charges, and parking fees are all allowable too. But – regular commuting doesn’t count.
Of course, you can claim for the cost of hotel rooms and meals on overnight business trips.
We’re specialists in tax for solo professionals
We’ve listed here just a handful of ways in which you should be saving money and claiming tax relief. Here at Mad Hatters Accountants, we’re tax experts. We know our tax stuff. We’re perfectly placed to guide you through the maze of tax claims. All it takes to give you peace of mind is to pick up the phone. We’ll be delighted to hold a no-obligation conversation and talk you through the process.
Remember – we’re here to help