Self-employed & freelancers – What business expenses can I claim?

As a freelancer or self-employed individual there are some business expenditure that will be classed as ‘allowable expenses’.

In this blog we give you a quick snapshot of the most common expenses that can be claimed when working as a freelancer or you’re self-employed. For more detailed information, read our guide to allowable expenses.

Use of home / working from home

A portion of home running costs can be allocated as allowable expenses. However, you need to work out the actual costs of running the business from your home. For example, if you use one of the five rooms in your house as an office for a full normal working week, you could claim a deduction of 20% of eligible and relevant home costs.

Eligible costs could include a proportion of:

Rent or Mortgage interest.

Gas, electricity, metered water rates, council tax and insurance.

Repairs, maintenance and cleaning.

Telephone.

Computer items e.g., printer cartridges, stationery et.

For more detailed information, read our guide to allowable expenses.

Mobile phone & office phone costs

You can claim part of your mobile expenses as a business expense, but it’s complicated to do. You need to understand what proportion of your mobile bill is for business purposes. It’s best to review a couple of bills and highlight business vs personal calls, this percentage may need to be verified by HMRC in the case of an enquiry.

Business calls from home are claimable, however, these must be itemised on the bill. Line rental and internet costs are not recoverable unless you have a separate line for business purposes.

Travel

Travel expenses are only allowed in relation to business journeys. This doesn’t include the cost for your commute from home to your workplace (“ordinary commuting”). For car mileage you can use a fixed rate for each mile travelled on business, using the fixed mileage rates; or the actual expenses, worked out using detailed records of business and private mileage to apportion your recorded expenditure.

The current fixed mileage rates are 45p per mile for the first 10,000 business miles per year and 25p per mile after that. This mileage includes travelling to and from temporary locations and between different sites. You will need to keep a log of your journeys.

If the mileage rate is used, you can’t claim for costs of running and servicing the vehicle or a deduction for capital allowances.

Car hire

If you use a hire car for business travel the costs in relation to car hire will depend on several factors including:

• Whether the car is on a short-term hire (< 45 consecutive days).
• Longer term contracts, the date the contract was entered into.
• CO2 emission of the car.

Car parking costs

If an original receipt detailing date and cost of the parking is available, you can claim parking costs.

Rail, bus, taxi, and air travel

Fare costs for business travel can be claimed if you have tickets or receipts.

Other travel costs

Tolls and congestion charges incurred while on business may be claimed. Original receipts are required.

Food and drink

If you’re working away from home for example on a business trip and you incur food and drink charges, these are deductible.

Accommodation

A reasonable cost per night for hotels can be claimed but you will need to produce receipts. If you’re claiming accommodation rental costs, your rental agreement must meet HMRC Dual Purpose rules i.e., you must already be maintaining a property and renting another property for the purpose of your contract.

Professional fees

If you engage an accountant, lawyer, or consultant, then the fees can be claimed as a tax-deductible expense.

Training / Education

Any training or education that relates to your work can be claimed ifyou can produce a bill or receipt for the full amount, your current job description, the name of the training course and a description of the training course and how it relates to your role. Costs of manuals or textbooks used for business purposes can also be claimed.

Stationery & postage

You can claim a deduction for stationery such as paper, pens, envelopes, printer ink etc. Business related postage costs can also be claimed for with receipts for all items of stationery and postage needed.

Charitable donations

Donations to charity from individuals are tax free. You can get tax relief if you donate to a charity through Gift Aid. You’ll need to keep records of all your donations if you want to deduct them from your taxable income. This is done when completing your Self-Assessment tax return.

Bank charges

You can claim for business costs such as bank, overdraft, credit card charges, interest on bank and business loans. Make sure that the bank charges you are going to claim are authorised. Unauthorised bank charges cannot be claimed as per HMRC guidelines. For example – Standing charges levied each quarter.

Business insurance

You can claim business insurance expense for many types of business insurance including, property insurance, personal indemnity insurance and professional indemnity.

Clothing / uniform

You can include the cost of uniform and necessary protective clothing, but not everyday clothing. People often want to know if branded clothing can be allowable. HMRC state that you have to demonstrate it is ‘solely for work’ and will take a hard line against dual usage clothing that could be used personally as well. Speak to your accountant to clarify.

Eye tests

Eye tests will also be tax deductible for the self-employed, provided the test is required for use of a computer monitor or other screen and their for use specifically for monitor or screen work. In exceptional circumstances the cost of glasses can be claimed if they are used only at work for Visual display. If you wear them outside of work, HMRC would class this as dual purpose and you couldn’t claim them as a tax deductible expense.

Deducting the right amount from your income for your expenses will ensure you’re compliant with HMRC and will minimise your tax bill. However, accurate records, invoices and receipts need to be kept for your records and if HMRC undertake an enquire.

This list is not exhaustive, so if you’re unsure whether a business expense is deductible, call dns now for further advice and clarification. Contact us for more information.

Also See: Umbrella Company Allowable Expenses

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.