Self Employed Expenses You can claimed?

If you work for yourself, you can deduct certain business expenses from your tax bill. This guide explains which expenses you can and cannot claim with HMRC as a self-employed person.

What is the procedure for self-employed expenses?

If you're self-employed, you'll be taxed on the amount of profit you make in a tax year, but there are a number of expenses you can deduct that will reduce your tax bill.

HMRC allows you to deduct the costs of certain purchases required to run your business. These expenses can be deducted from your profit, lowering the amount of tax you owe.

In general, unless you purchase a capital asset for your business, such as a computer or machinery (which you claim under different rules), you can deduct the full cost when calculating your taxable profits.

You receive immediate tax relief for the entire amount.

With the Which? tax calculator, you can get a head start on your 2020-21 tax return. With Which?, you can calculate your tax bill, learn where to save money, and submit your return directly to HMRC.

What self-employment expenses can I deduct for tax purposes?

Knowing what you're entitled to claim can be difficult, especially since self-employment varies greatly from person to person.

See our lists below to calculate your tax-deductible expenses.

Expenses incurred as a self-employed person if you use business premises

You may assert:

• Heating
• Lighting
• Cleaning
• Water prices
• Rent
• Rates for businesses
• Maintenance in general

You cannot assert:

Self-employment costs if you work from home

You can deduct a portion of the costs for:

• Lighting
• Heating
• Cleaning
• Insurance
• Mortgage loan interest
• The local government tax
• Water prices
• Maintenance in general

However, you will not be able to deduct all of your expenses. The figures you submit should be based on the floor area or number of business rooms, as well as the percentage of time the space is used for working.

Keep in mind that if you begin working from home, you may need to update your home insurance policy. Which?

If you work from home for 25 hours or more per month, you may be able to use HMRC's simplified expenses system.

Expenses for travel and lodging can be claimed.

You may assert:

• Travel and lodging for business trips and between locations of employment.
• Fuel, car tax, insurance, repairs, and servicing are all part of the running costs of a car or other vehicle.

If you use the car for personal reasons, you can only claim a portion of the costs that correspond to how much the car is used for business purposes. This is typically the ratio of business mileage to total mileage. It's a good idea to keep a log of business mileage as well as all bills for a representative period.

You cannot assert:

• Travel between your home and your workplace.
• The price of purchasing a vehicle (although it may qualify for capital allowances).
• Meals, with the exception of a reasonable amount for breakfast and dinner on overnight trips.

Expenses for salaries and benefits

You may assert:

• Wages and redundancy payments to employees
• National Insurance for Employers
• Employee insurance and pension benefits
• Any employee childcare arrangements you make
• The cost of employee training.

You cannot assert:

• Your own earnings, salary, or other money derived from the business
• Contributions to National Insurance and income tax are your responsibility.
• Your personal pension costs
• Your own life insurance policy

How does HMRC determine whether I am self-employed?

HMRC distinguishes between employees who work under a 'contract of service' and self-employed individuals who work under a 'contract for services.'

It determines which you are by asking some standard questions. If you can answer 'Yes' to all or most of the following questions, you are likely to be accepted as self-employed:

• Can you hire someone to do the work for you, or do you have to hire helpers at your own expense?
• Do you put your own money at risk?
• Do you provide the major pieces of equipment required to do your job, rather than just the small tools that many employees provide for themselves?
• Do you agree to do a job for a set price regardless of how long it takes?
• Can you make decisions about what work to do, how and when to do it, and where to provide services?
• Do you frequently work for a variety of people?
• Is it necessary for you to correct unsatisfactory work on your own time and at your own expense?

Finding best Accountants in Ashtead has never been a straightforward process. A team of accounting professionals has worked hard to make sure the accountants on our platform have been carefully selected and confirmed. They are also available to respond to your inquiries immediately.