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. To help, 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 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, stationery, 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. If your travel is overnight, you can claim 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 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 what you can claim on, contact the Government’s self-assessment helpline to check.
Working from home
If you work from home, you may be able to claim on 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. You can only use simplified expenses if you work for 25 hours or more a month from home. The work from home flat rates 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, repairs and servicing. The Government has created a flat rate per mile[1], that we’ve shown below:
45p flat rate per mile with simplified expenses
25p flat rate per mile with simplified expenses
24p flat rate per mile with simplified expenses
How do I claim expenses as a sole trader?
When you complete your self-assessment tax return, you have the option of providing one figure or a complete breakdown of all your expenses. If you only provide 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.
Sources:
[1] https://www.gov.uk/expenses-if-youre-self-employed