Tax deductibles for sole traders

One question that many business owners ask is “which business expenses are tax deductibles for sole traders?” This is important to know so you can establish your taxable profit, and calculate the tax that is due to HMRC. As a business owner you don’t want to overpay on your tax bill, but on the flip side you definitely don’t want to underpay and risk a fine and potential HMRC investigation!

Picture of a tax return and expense records

Below is a list of the types of taxable business expenses you can claim for as a sole trader:

Office costs
  • Rent, business rates, utility bills, property insurance and security costs
  • Property repairs or maintenance (but not improvements)
  • Phone, mobile and broadband bills
  • Postage, printing and stationary
  • Computer software
Travel costs
  • Vehicle insurance, breakdown cover, servicing and repairs
  • Fuel and parking costs
  • Vehicle hire charges
  • Other travel costs (i.e. train, tax, bus and flights)
  • Hotel rooms and meals for overnight business trips
Clothing
  • Uniforms and protective clothing
Staff Costs
  • Salaries, bonuses, employer pension and national insurance contributions
  • Staff benefits
  • Recruitment fees
  • Sub-contractor fees
  • Staff training
Production costs
  • Stock
  • Raw materials
Financial costs
  • Business insurance
  • Accountants fees
  • Business legal fees (including solicitors)
  • Business bank charges (including interest and fees)
Marketing & advertising costs
  • Advertising, including business cards and brochures
  • Website costs
Other costs
  • Trade and professional body subscriptions/memberships
  • Warranty costs for equipment
  • Equipment rentals
  • Books and business related magazines
  • Bad debts already included in turnover

One key area that you can’t claim for:
  • Entertaining (either clients or suppliers)

Other considerations

Some important points to consider when calculating your tax deductibles for sole traders are:

Business vs. personal use

You can only claim for the % of spend used by the business. For example if you use your home phone for business and personal calls, you can only claim for the business call element.

Working from home

You can claim a proportion of house costs (i.e. council tax, utilities, rent), but have to use a reasonable method for apportioning costs. An example is an office taking up 10% of your home space. If you use the office 7 days a week you could claim 10% of relevant costs. If you use the office for 2 days a week, you could claim 3% of costs.

Simplified expenses

Sole traders are able to claim simplified expenses for a couple of areas, to make the claims easier to manage. Below is a list of the expenses you can claim for in a simplified way:

Mileage (records must be kept)
  • Motor vehicles (exc. motorbikes): 45p per mile for first 10,000 business miles, then 25p per additional business mile
  • Motorbikes: 24p per business mile
Home costs (must work at least 25 hours per month at home)
  • 25-50 business hours = £10 per month
  • 51-100 hours = £18 per month
  • 101+ hours = £26 per month

While simplified expenses may be easier, you may not save as much from a tax perspective. It’s best to check which method of expense calculation will save you the most money on your tax bill!

Capital allowances

If you are going to use an asset for over 2 years, you are able to claim using capital allowances. Some examples of capital expenditure include:

  • Property (including legal expenses for purchase) including improvements
  • Vehicles (i.e. cars, bicycles)
  • Equipment to produce goods (i.e. machinery)
  • Office furniture and furnishings (i.e. desks, curtains)
  • IT equipment (i.e. computers, printers, photocopiers, cameras, tablets and phones)
  • Goodwill on acquisitions
  • Research and development costs

Note: You can claim capital expenditure on items introduced to your business that were purchased before you started your business.

Still need further help?

If you are unsure whether to claim for an expense, you can contact HMRC on 0300 200 3310 or here. Make sure you have your National Insurance and Unique Taxpayer Reference ready!

Alternatively contact Paul at Enrich Accounting here, on 07403 407455 or at paul@enrichaccounting.co.uk for further advice.

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