This is a guide to the expenses which businesses can claim against tax
There are separate (but similar) rules for Sole Traders
and Limited Companies
There are similarities in the lists of allowable expenses for Sole Traders and Limited Companies, but there are key differences which can lead to confusion. If in doubt check with your accountant or HMRC
Sole Traders and Partnerships (Self-Employed)
People who are Self-Employed
, but not through a limited company, may claim expenses which are "wholly and exclusively"
incurred in the course of the business.
may claim expenses which are "wholly and exclusively"
incurred in the course of business.
Examples of Expenses which you can claim:
• Costs relating to the construction and delivery of products for resale.
• Business premises expenses, including business rates, rents, electricity and gas.
• Office expenses including stationery, postage and computing consumables.
• Marketing expenses including advertising, brochures, business cards.
• Travel expenses away from home, including meals, accommodation and fares, although there are limits.
• Motoring expenses directly for the business including fuel and repairs (there are some "place of business" exceptions to this). However it may be more tax efficient to claim the 45p for the first 10,000 miles and 25p thereafter if you are under the VAT threshhold).
• Staff costs, including salaries & wages, most training, clothing which is clearly branded for the business.
Examples of Expenses NOT ALLOWED AS TAX DEDUCTION:
• Entertaining customers or suppliers
• Private meals
• Mileage to and from "place of business"
• Unbranded clothing
• National Insurance contributions
Capital Items / Fixed Assets
Major expenses items, typically over £500, eg. equipment, computers, vehicles, are classed as "Capital Expenditure" for tax purposes.
They are allowed for taxation as Capital Allowances
which is a different system than expenses. The Capital Allowances system changes from year to year, but frequently a business with relatively low value capital purchases, eg. a personal computer, will be able to claim the full cost in the year of purchase.
If you choose the new Cash Basis
then many Capital purchases will be allowed as an expense in the year of purchase.