What can I claim as an expense as a sole trader?

If you’re operating as a sole trader, it can be confusing knowing which expenses you can claim for and which ones you can’t. So, to try and make it as clear as possible for all the business owners out there, we’ve pulled together some information on the most common expenses claimed.

One of the first things to note is that HMRC has strict rules and regulations around what you can and can’t claim. The ones that you’re allowed to claim for are called ‘allowable expenses’. This basically means you’re only allowed to claim for things that are strictly related to your business.

What can I claim as an allowable expense? ^[1]

• Office costs – This can include postage, stationary and printing costs (including ink)
• Travel costs – This can include vehicle fuel, parking, insurance, repairs and breakdown cover. It also covers bus/train/plane fares as well. If your travel is overnight, you can claim on hotel rooms and meals during your stay
• Clothing expenses – This includes the cost of any uniform, necessary protective clothing or costumes for actors/entertainers
• Staff costs – You can put forward staff salaries forward as expenses, as well as bonuses, pension contributions and benefits
• Materials you buy to sell on – The cost of your stock and raw materials can be put forward to claim expenses
• Financial costs – As long as it’s for business reasons, you can include the cost of any accountants, solicitors, or surveyors
• Your premises costs – This can include heating, lighting as well as other utility bills. Among these, you can also claim for insurance and security
• Marketing or advertising – This can include website costs, newspaper ads, mailshots or free samples

If you’re unsure whether an expense is claimable, then you can contact the Government’s self-assessment helpline to check.  

If I work from home, can I still claim expenses?

If you work from home, you should be able to claim on a few things. This includes heating, electricity, Council Tax, mortgage/rent and internet/phone use.

You’ll need to come up with a fair and responsible way of dividing up business versus personal costs. We’ve pulled together an example below of a utility bill to give you a rough idea:

• You have 5 rooms in your house, and you only use one of them for your business
• One of your utility bills is £500 a year. You could divide this cost by 5 to find the average cost for your working space, in this case £100
• If you worked from home 70 days (or 10 full weeks a year), you’d need to divide that £100 by 52, then multiply by 10, meaning you could claim £19.23 as an expense

If you want to avoid manual calculations, you could choose the ‘simplified expenses’ option. Simplified expenses are flat rates provided by the government to cover costs of utilities, rent and other costs. As long as you work from home at least 25 hours a month, you should be able to claim. The work from home flat rates for the 2018/19 tax year are:

• £10 per month if you work between 25 - 50 hours per month
• £18 per month if you work between 51 - 100 hours per month
• £26 per month if you work over 101 hours per month

Another thing that you can claim as a ‘simplified expense’ is running costs for a vehicle. This could cover fuel, insurance and repairs and servicing. The government has created a flat rate per mile[1], that we’ve shown below:

How do I claim expenses as a sole trader?

When you complete your self-assessment tax return, you have the option of just providing one figure or a complete breakdown of all your expenses. If you only provide the one figure, be prepared to provide evidence and back up this figure should the HMRC question it. Make sure to keep receipts, as that will help with proof of purchase etc.

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Sources

^[1] https://www.gov.uk/expenses-if-youre-self-employed

This content was created on 14th May 2019