Self-employed: what are allowable business expenses for HMRC?

As a self-employed individual in the UK, understanding allowable business expenses can help you reduce your tax bill by deducting certain costs from your income. These expenses lower the amount of profit you pay tax on, allowing you to keep more of your hard-earned money.

To make sure you’re claiming the right expenses and staying compliant with HMRC, it’s essential to maintain accurate records and receipts for everything you spend that is business-related.

Let’s walk through some common expenses that you can claim as a self-employed individual, along with a few tips to help you maximize your deductions.

1. Travel Expenses

When you travel for business, whether by train, car, or bus, your travel expenses are often fully deductible. This includes car park fees, tolls, and fuel if you're visiting clients or suppliers. However, travel between your home and your regular place of business (commuting) is not allowable.

If you use your own vehicle, you can choose between claiming actual costs based on the proportion of business use (like fuel, insurance, and maintenance) or a mileage allowance. HMRC allows 45p per mile for the first 10,000 miles and 25p per mile thereafter. Mileage claims cover all vehicle costs, so you can’t claim fuel or repairs separately if you opt for this.

If your business is VAT-registered, remember that you can reclaim VAT on travel costs related to your business.

2. Office Costs & Equipment

Whether you work from home or rent a separate office, you can claim expenses for your workspace. If you rent office space, all running costs, including rent, maintenance, and repairs, are allowable.

For home-based businesses, HMRC lets you claim a portion of your household bills, such as heating, electricity, and water, based on how much of your home is used for business and for how long. The easiest option is to use HMRC’s flat rate of £4 per week, but if you claim more than this, you’ll need to keep detailed records and receipts.

Additionally, business-related equipment like laptops, printers, and office furniture is fully deductible if used solely for your business. If these items are also used for personal purposes, you can only claim a proportion of the cost.

3. Marketing & Advertising

Costs related to promoting your business are fully deductible. This includes online advertising (Google Ads, Facebook Ads), print ads, website design, and even costs for hosting and domain registration. All of these expenses are considered essential for growing and maintaining your business presence, so be sure to keep records of all marketing costs throughout the year.

4. Phone & Internet Bills

If you use your phone and internet connection for business, you can claim part of these bills as allowable expenses. You’ll need to calculate the percentage that relates to business use versus personal use. Having a dedicated business line or mobile phone can make this process easier.

If your phone or internet is used exclusively for business, you can claim the entire cost.

5. Professional Fees & Subscriptions

Membership fees for professional organizations or industry-related subscriptions are tax-deductible if they are necessary for your business. For example, fees for trade associations or industry journals that help you stay informed or maintain professional qualifications can be claimed.

HMRC also allows deductions for services such as accountants, legal advisors, or any professional support you need to run your business.

6. Insurance

Insurance is a vital part of protecting your business. If you take out public liability insurance, professional indemnity, or other forms of business insurance, you can claim these costs. If you work from home, a proportion of your home insurance that relates to your business use can be included in your claims.

7. Stock & Materials

If you sell products, you can claim the cost of goods you purchase for resale. This includes the materials you use to make your products. At the end of each accounting period, make sure you note down the value of any unsold stock, as this will affect the timing of your tax relief.

8. Staff Costs

If you employ staff, you can claim for wages, bonuses, National Insurance (NI) contributions, and pension contributions. Even the cost of training staff and any other benefits you provide to them, such as childcare, are deductible.

9. Bank Charges & Interest

Business bank account fees, credit card charges, and loan interest for business purposes are allowable. If you’ve taken out a loan or finance agreement to support your business, the interest you pay is tax-deductible.

10. Training Costs

While you can’t claim for learning new skills, you can claim tax relief on training that refreshes or updates your existing skills relevant to your business. This means that if you take a course to enhance skills you already have, such as updating your qualifications, you can deduct the cost.

11. Bad Debts

If a customer hasn’t paid you and you’ve already included this income in your turnover, you can claim this amount as a "bad debt" expense. Once you've officially written off the debt as unrecoverable, it can be deducted from your profits, reducing your taxable income.

12. Stationery & Postage

Basic office supplies such as paper, envelopes, pens, and ink cartridges, as well as postage costs, are all allowable. This also includes any packaging and shipping costs if you send products to your customers.

13. Clothing

If you need specific clothing for your business, such as protective gear or uniforms, you can claim the cost as a business expense. However, general work attire like suits or regular clothes is not allowable, even if you wear them for business purposes.

Stay on Top of Your Tax Deductions

Maximizing your allowable expenses can significantly reduce your tax bill, but it’s important to keep accurate and detailed records. Every receipt, invoice, and bill you have should be properly stored and organized, as HMRC may request proof of any expenses you claim.

For more detailed guidance on allowable expenses, visit HMRC’s official page here. If you’re unsure about any deductions or want to make sure you're making the most of your allowances, consult a professional accountant to help you manage your finances efficiently.