This means you can calculate some of your business expenses using flat rates instead of working out your actual business costs. Unlike limited companies, sole traders are able to use HMRC’s simplified expenses for certain types of business expenses if they wish. However, if the dual purpose is only incidental because of a business necessity, the claim may still be valid, such as protective work clothes or uniforms that could also be used for personal use.
Evidencing this may, however, be difficult if the phone contract is not in the name of your business. dual purpose) to your claim it’s unlikely to be accepted, because the expense would be needed regardless of the business.įor example, if your monthly mobile phone bill is £50 but you only use your phone 50% of the time for business use, you can only claim for £25 as an expense. When there are both personal and business elements (i.e. HMRC will normally allow your claim if you meet these conditions. The rule of thumb when claiming for any expenses is that you can only claim for expenses which are ‘wholly and exclusively’ incurred in the performance of your duties.
It’s important you understand all the expenses you can claim as allowable business expenses reduce the amount of tax you need to pay HM Revenue and Customs (HMRC) when you submit your Self Assessment tax return. How to claim self-employed business expenses as a sole traderĪs a sole trader, you can claim back any expenses you’ve incurred that relate directly to your self-employed business in much the same way as limited companies. When in doubt, always contact an accountant such as Crunch for advice. Our Crunch Free bookkeeping software can help with all of this.Īs always, HMRC rules can be complex and are often based on concepts such as the ‘fairness’ and ‘reasonableness’ of expenses claimed. Bear in mind that you’re legally bound to keep these records for six years. To account for your expenses properly, you need to keep accurate records of everything and add up all your business costs to report on your Self Assessment tax return. So, more allowable expenses means less taxable profit and less Income Tax to pay.
Allowable business expenses reduce the amount of profit on which sole traders pay Income Tax. When you’re self-employed you pay tax (Income Tax) on your trading profits.
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