What Business Expenses Can I Claim?

01

Introduction

If you're self-employed, keeping track of business expenses can feel like a job in itself. Receipts end up in your bag, email invoices get buried and sometimes you're left wondering whether a purchase counts as a business expense at all.

Getting this right matters because allowable expenses can reduce the profit you pay Income Tax on. But you shouldn't claim something just because you bought it while running your business.

Here's how to approach your expenses with more confidence.

02

What counts as a business expense?

For a sole trader, allowable expenses are costs related to running your business that HMRC permits you to deduct when calculating taxable profit.

For example, if your turnover is £40,000 and you have £10,000 in allowable expenses, your taxable profit would be £30,000, before considering any other adjustments that may apply.

Common examples include:

• Office supplies and stationery.
• Business insurance and certain bank charges.
• Advertising, marketing and website costs.
• Software and business subscriptions.
• Stock or materials you buy to sell or use in your work.
• Qualifying business travel.
• Certain professional fees.

The rules depend on the type of cost and your circumstances. See HMRC's guide to expenses for the self-employed.

03

What if I use something for work and personal reasons?

This is where it's worth slowing down before claiming the full amount.

If something is used for both business and personal purposes, you generally need to identify the business-related part of the cost.

For example, if you use your phone for both personal and business calls, you cannot automatically claim the whole bill. You need to work out the allowable business element and keep a reasonable record of your calculation.

Working from home has its own rules too. You may be able to claim a reasonable proportion of certain household running costs, or use HMRC's simplified expenses method if eligible.

Don't guess or automatically claim 100%. If you're uncertain, record the details and check the relevant HMRC guidance.

04

What about receipts?

You should keep records that support your business expenses. These might include receipts, supplier invoices, bank statements and notes explaining what a purchase was for.

You don't normally send every receipt with your Self Assessment return, but you must keep supporting records in case HMRC asks to see them.

A bank statement can show that money left your account, but it may not explain exactly what you bought or why it was needed for your business. Keeping the receipt or invoice makes that much easier to establish.

See HMRC's guidance on which records to keep.

05

A simple monthly routine for managing expenses

You don't need an elaborate system. Start with these four steps:

1. Gather your receipts and invoices. Check your email, paper receipts and any folders where you save documents. Choose one consistent place to keep them.
2. Record each expense. Include the date, supplier, amount and what the purchase was for. Use your spreadsheet or bookkeeping software, and attach or save the supporting evidence.
3. Check anything you're unsure about. Don't automatically claim an expense if the business purpose isn't clear or it has both personal and business use. Make a note to check it.
4. Review your records against your bank statements. Look for missing transactions, duplicates and payments you can't identify. Deal with questions while the details are still fresh.

Doing a little each month is usually easier than trying to make sense of a full year's receipts just before your tax return is due.

06

What should I do if I can't tell whether an expense is allowable?

Keep the receipt, note what the purchase was for and avoid assuming that the whole cost can be claimed.

Some expenses have specific rules, including certain clothing, entertaining and equipment purchases. The correct treatment can depend on the details.

If you're a limited company, don't automatically apply sole-trader rules to your situation. A company's expenses are dealt with under the relevant company tax and reporting rules.

You can start with HMRC's official guidance or seek advice if the answer isn't clear.

07

Get your bookkeeping into a routine

You don't have to understand every tax rule to improve your records. You do need a consistent way to record expenses, keep the evidence and flag anything that needs checking.

At Dainty & Grace Co., I help small business owners organise their bookkeeping and identify areas that need attention.

If you're not sure whether your records are in good shape, a £30 Bookkeeping Check-Up provides a review of your books, with practical notes on what needs attention and what to do next.

If you'd like to build the routine yourself, The Small Business Bookkeeping Starter Guide covers recording income and expenses and keeping your receipts and supporting records in order.

Explore one-off bookkeeping support, or get in touch to tell me where things are now.