In this article, we cover self employed tax deductible expenses. Allowable expenses might lower your self-assessment tax liability if you work for yourself. We discuss what you can and cannot claim. We cover top expenses for self employed.
Reach out to one of our professionals to get to know about self employed tax deductible expenses in the UK. Get in touch with us and you will be provided instant professional help!
What is Self Employed Tax Deductible Expenses
Here is the basic explanation of the term self employed tax deductible expenses. If you work for yourself, you can expect a variety of operating expenses. As long as these expenses are permissible, you can deduct some of them from your taxable earnings.
For instance,
You will only be required to pay tax on the remaining £30,000, which is known as your taxable profit if your turnover is £40,000 and you claim £10,000 in allowable expense. Funds used for your purchases are not considered as allowable costs.
Self Employed Tax Deductible Expenses that can be Claimed
These are the listed names of self employed tax deductible expenses which can be claimed:
- Office expenses
- Travel expenses
- Clothing expenses
- Staff expenses
- Reselling good expenses
- Financial expenses
- Marketing expenses
- Training expenses
On the other hand, there are also some allowable expenses which can not be claimed for tax deduction.
Expenses that Cannot be Claimed
When you purchase an item that you intend to use in your firm, you can claim capital allowances if you utilise traditional accounting.
For instance:
- machinery and equipment
- business automobiles, such as trucks, vans, and cars
If you utilise your £1,000 tax-free “trading allowance,” you are not eligible to claim capital allowances. You can claim a capital allowance if you purchase an automobile for your company using cash-based accounting. All other products you purchase and retain for your company should be reported as typical business expenses.
What to Claim if you Work from Home
You might be eligible to deduct a percentage of your expenses for items such as:
- Electricity
- Heating
- Rent or interest on a mortgage,
- council tax
- Use of the phone and the internet
You must calculate the cost to claim and figure out a fair way to split your expenses, such as by the number of rooms you use for work or the amount of time you spend working from home. Only business-related expenses are eligible for refund.
Top 5 Self Employed Tax Deductible Expenses
Here is an explanation of the few expenses:
Office Expenses
For less than two years, you can deduct costs for office supplies such as stationery, phone, mobile, internet, postage, printer ink, and computer software. You can also claim your business’s rent, rates, utilities, property insurance, and security. You can deduct business-related expenses if you use your house as an office. Claims can be made for equipment and commercial space repairs and upkeep, but not for real estate purchases. Use capital allowances in traditional accounting or permitted expenses in cash basis accounting for equipment installation or modifications. Additionally, some essential building components might be eligible for capital allowances.
Travel Expenses
You can claim a capital allowance if you purchase a car for your company using traditional accounting. You can claim a car purchase as a capital allowance if you utilise cash-based accounting. Claim them as permissible expenses for all other vehicle kinds.
The following are examples of permissible business expenses:
- Auto insurance
- Maintenance and repairs
- Fees for parking and fuel
- The breakdown of the vehicle
- Licence payments
- Hotel accommodations,
- Food for overnight
- Work trips
- Fares for buses, trains, aeroplanes and taxis.
You are unable to claim for:
- Fines for non-business driving
- travel expenses
- the journey from home to work
Clothing Expenses
Food and clothing are necessities for everyone, but whether or not you claim them as expenses depends on how you plan to use them.
Clothes
Generally speaking, if you would use the item as part of your regular wardrobe, you cannot claim it. Therefore, you cannot claim the cost of a suit you purchased for work. However, you can claim if you need to purchase a uniform that identifies your work or if you require certain protective gear to perform your duties. Shoes and socks are examples of non-uniform products for which you cannot make a claim.
You may be eligible for tax savings if you are an entertainer and the clothing you are purchasing is for a stage, television, or movie performance. You may deduct costs for washing, repairing, or replacing any uniforms or specific protective gear you wear.
Food
Food and beverages can only be claimed as business expenses if they are incurred outside of your regular work schedule, such as on a business trip.
Staff Expenses
You can deduct business expenses for:
- Wages for employees and personnel, including your pay if you use PAYE
- subcontractor expenses
- payments to the employer’s pension plan
- employer-sponsored training programs,
- agency fees,
- employer-sponsored national insurance contributions,
- bonuses, and benefits
The following expenses cannot be claimed:
- Salaries given to a company partner
- Salaries for carers or household assistance, such as nannies or gardeners
Reselling Goods
Business expenses for supplies and products (reselling goods) are deductible. This comprises:
- Raw resources and products for selling
- Direct expenses related to manufacturing items
- Additional expenses for supplies and goods that are required and suitable for your company
Items purchased for personal use or technological purposes are not eligible for claims.
When to Report your Self Employed Tax Deductible Expenses to Universal Credit
Once a month, you have to submit your self employed tax deductible expenses to Universal Credit. This is often done in your online account. When you need to report something, you will receive an email or SMS alert. You are required to notify Universal Credit if you have no self-employed income or costs for that particular month. You must submit your company expenses before you may receive your Universal Credit payment. Your payment can be postponed if you arrive late. You must get in touch with Universal Credit if you are unable to report online.
Conclusion
We created this blog to assist non-tax advisors who counsel low-income self-employers as well as independent contractors who need more comprehensive information in a single, easily accessible location. This blog provides further in-depth information, including self employed tax deductible expenses, rules and a case study that demonstrates how to create accounts using the simplified expenses for a vehicle, travel, clothing and basic expenses. It also covers when to report for universal credits.
Get in touch with our young, clever, and tech-driven professionals if you want to choose the solution to tax burden or accounting problems in the UK for your income. We will ensure to offer the best services.