12 Self Assessment expenses you didn’t know you could claim - YouTube

Hello there. Nicholas Campion here from 1st Formations and in this video we're going to be  

looking at 12 self-assessment expenses that  you maybe didn't know that you could claim.  

As always, this video is part of our Whiteboard  Thursday video series, where we take a look at  

all of the aspects of running UK limited companies,  so make sure you 'Subscribe' to our channel if you  

want to keep up to date with all of our insights,  advice and inspiration. But for now, let's get going.

So, running your business isn't always easy,  especially where accounting is concerned. As  

a business owner you'll have a  range of reporting regulations and requirements  

to fulfil for both HMRC and Companies House on  behalf of your company, but what some aspiring  

entrepreneurs may not realize is that when you  start your own business, you also need to register  

for self-assessment. Self-employed sole traders,  Limited Company Directors, shareholders, and LLP  

members all of these, are obligated to register  for self-assessment and in turn to send in  

self-assessment tax returns to HMRC every single  year. And based on their earnings, most individuals  

will need to pay income tax and National Insurance  contributions on their taxable income. The amount  

you owe will vary dramatically, depending on how  much profit you made in the previous tax year.  

Fortunately, the UK Government appreciates  that running your own business can be an  

expensive endeavour. That's why you are allowed  to deduct the cost of some of these business  

expenses from your profit, thereby reduce the  amount of tax you owe through self-assessment.  

So, to kick off our list of 12 self-assessment  expenses that you may not have known that you  

can claim, I will be starting with number one, and  that is office supplies. If you are having trouble  

finding business expenses to claim  on your self-assessment return  

well then you don't really need to look  any further than the desk in front of you. 

HMRC will allow you to claim a range of expenses  pertaining to your office supplies, including your  

desk phone, your mobile phone, your fax machine,  postage costs, business stationery, printing costs,  

any computer software that your business uses for  less than two years, and any computer software that  

your business uses and makes regular payments to,  in order to renew the license. You can even claim  

for your laptop and tablet or home computer,  but only in so far as it is used for business.  

That means if you have purchased a family computer  in the previous tax year, that you're only using  

for business 50% of the time, then  you can claim that cost of that computer as a  

business expense on a pro rata basis. For some  bigger items like computers or expensive software,  

you may find you need to claim  these expenses as capital allowances.

So, number two on our list is donations to  charity. If you gave money to charity last  

year, you should be claiming those donations  as self-assessment expenses on your tax return.  

All donations made by individuals to registered  charities or community amateur sports clubs are  

100% tax-free. This is called tax relief and how  it works depends on how you choose to donate  

the funds. Typically, charitable donations are  made through a gift aid or directly from your  

wages or pension through a payroll giving scheme,  land property or shares, or through your will.  

Charitable tax relief rules also  apply to sole traders and partnerships,  

but not for donations that are  made on behalf of limited companies.

Number three is mileage costs. If you drive  a car or van for work, you can claim money off  

your tax bill for every mile travelled. Now  you'll need to be conscious   

of the mileage permitted, because  there are going to be limits on here.  

It is also worth looking at other travel expenses  that you can claim on your self assessment return,  

and allowable business expenses here  include things like vehicle insurance,  

repair and servicing, fuel parking, hire  charges, vehicle license fees, breakdown cover,  

train, bus, air and taxi fees, hotel rooms  and meals on overnight business trips.  

That being said, it is worth noting that you cannot  claim for non-business driving or travel costs,  

fines you incur while driving, or any travel  between your home and your regular place of work.  

Number four: legal and financial costs. When  calculating your self assessment expenses  

you should also include any costs associated with  hiring an accountant, a solicitor, a surveyor, maybe  

an architect, or basically any professional  that you've paid to assist you. Likewise,  

you can claim costs for professional indemnity  insurance premiums, as well as a range of other  

bank and insurance cost. Allowable expenses  here also include bank, overdraft  

and credit charges, interest on bank and  business loans, higher purchase interest  

leasing payments, and alternative finance  payments such as Islamic finance. If you are using  

cash basis accounting, be aware that there are  limits to the amount you can claim in interest  

and bank charges on your self assessment form. You  are allowed to claim any legal costs associated  

with buying property or machinery, although if you  use traditional accounting, you can claim for them  

as capital allowances instead, similar to  travel expenses. You are also not permitted to  

claim any legal or financial costs that you've  incurred as a result of you breaking the law.

Number five: Unpaid invoices. This is probably one  of the most beneficial and unused expenses that  

you should be claiming as a business owner.  If you are using what is called traditional  

accounting HMRC allows you to claim for any amount of money included in your turnover that you aren't  

planning on receiving. What this is called is  bad debt, and the only prerequisite for including  

it in your expenses is that you must be sure that  these invoices will never be recovered from a  

customer in the future. You aren't allowed to claim  for any unpaid debts that aren't included in  

your turnover, are related to the disposal of fixed  assets such as land building or machinery, and  

those which aren't calculated properly. It is also  worth noting that bad debt cannot be claimed on  

self assessment forms if you are using something  called cash basis accounting. Now this is because  

you've not received the money from your debtors  and because cash basis accounting only records the  

income on your return that  you have actually received.

The sixth one: The cost of  marketing your business. HMRC will  

allow you to claim business expenses for  any advertising you've done in newspapers,  

directories, bulk mail advertising, any  costs associated with free samples  

that you produce and distributed, and of course web  hosting and maintenance costs. Of course, there are  

a few exceptions to the rule. You are not permitted  to claim for entertaining clients or  

suppliers or event hospitality expenses as  part of your annual self assessment return.  

Number seven: We're going to move on to  the other side of the board now and get ready  

for this because number seven is your clothes. Now,  you are not allowed to claim the contents of your  

entire wardrobe as an allowable expense, but there  are certain items of clothing that you can claim  

to reduce your self-assessment tax bill at  the end of each financial year. Permitted  

clothing expenses here will include things like  work-related uniforms, protective clothing or  

maybe costumes for actors and entertainers. Unlike  travel expenses, you you are allowed to deduct  

the entire cost of work-related clothing from your  profits on your annual tax bill. Unfortunately, you  

can't claim for everyday outfits that you choose  to wear to work to qualify as a business expense.  

These clothes have got to be necessary  work specific items of clothing.

Now number eight: Staff costs if you employ  permanent workers, seasonal employees or contractors  

to help you run your business, you can claim a wide  range of expenses associated with their employment,

including employee and staff salaries,  bonuses, pensions benefits, agency fees,  

subcontractors, employer national insurance,  and business related training courses.  

There are a couple of staff costs HMRC does not  view as permitted business expense. For example,  

you are not allowed to claim costs associated  with a nanny or a childminder as an expense.  

The ninth self assessment expense that you  might not know you could claim is subscriptions.  

If you are subscribed to any professional  bodies or trade publications that directly  

feed into your job, then you can claim the cost of  those subscriptions as self-assessment expenses.  

Permitted expenses include a subscription to  any trade professionals or academic journals.  

Likewise a subscription or annual membership to a  professional organisational union will also apply  

as a permitted expense. Now, you should note that  any payments you make to any political party do  

not count as claimable subscriptions. Likewise, you  can't claim personal subscription expenses like  

gym memberships or glossy magazines. It is also  worth noting that you should not claim donations  

you made to a charity as a subscription, even if  you are donating on a subscriber level membership.  

These expenses here can be tallied  up as charitable donations which have  

their own set of rules and which we very  briefly touched upon over previously.

Up next at Number 10: Your mortgages and utilities.  If you work from home, you've got a whole range of  

self assessment expenses you should be claiming,  although there are some crucial caveats you  

need to bear in mind. You can claim a proportion of your gas, electric,  

water, broadband and telephone bills as allowable  expenses when working from home; however, you must  

calculate how much of each bill actually applies  to your business. For example, if you work from home  

in a five room house, for this purpose kitchens and  bathrooms do not count as a room, and only one of  

these five rooms is used exclusively for business  purposes. Well then, that means that you can claim  

20% of your annual bills as self assessment  expenses on your tax return. The same rules  

apply to your mortgage interest, but not capital  repayments or annual rent costs if the room serves  

another purpose, say for example being a spare  bedroom, or you only work from home one day a week.  

You need to apportion the costs associated with  the room according to the business use.  

Now, HMRC does not provide exact guidance on how  this should be done; you simply need to apportion  

the cost between the business use and private use  on a fair and reasonable basis. It is worth bearing  

in mind that if you sell your home, capital gains  tax will apply for the part of the property used  

for business, unless it serves a dual purpose.  So, for this reason it's usually  

best to avoid having somewhere in your home  solely for use for business purposes.  

Number 11 here is Council Tax. A lot of  self assessment users tend to forget  

about Council Tax when calculating their  business expenses. But in the same way that  

you are permitted to count a portion of your  mortgage interest and/or rent or utility bills  

against the cost of your tax bill, you can  also factor in part of your Council Tax bill.  

The same rule applies regarding how to calculate  the amounts you're allowed to chalk up as an expense.  

If your home office accounts for  20% of the space in your property, then you  

are allowed to claim 20% of the costs of your  Council Tax on your self assessment tax bill.  

Finally, the twelth self assessment expense  that you probably didn't know that you could  

claim is the flat rate simplified expenses. Now, of all the self-assessments expenses that you should  

be claiming on your annual tax return, simplified  expenses are the easiest. The clue's in the name.  

HMRC allows for a no-quibble flat rate deduction  for sole traders and partners in a business  

partnership who work from home for at least 25  hours per month. The flat rate will depend  

on the amount of actual hours of business use per  month. It does not include broadband or telephone  

expenses, so you can claim these costs in addition  to the flat rate. While simplified expenses are  

quick and easy to include in your self-assessment  tax return, you may find that

you're missing out on the opportunity to deduct  more business costs from your tax bill. HMRC's

online expenses tool will help you determine  whether it's better to claim simplified expenses  

or calculate the actual cost of working  from home. So then, what's the bottom line?  

At the end of the day there are loads of perfectly  reasonable self-assessment expenses that HMRC will  

be willing to accept as part of your tax return,  particularly if you're using simplified expenses.  

That being said, it is crucial that you are  able to prove that these expenses are valid.  

That means you need to keep records of all of your  business expenses as proof of your costs. You don't  

need to send these records in as proof of expenses  when you submit your self assessment return, and  

indeed many people will never be asked to see theirs.  But if HMRC does choose to look into your accounts  

and ask to see proof of your expenses, then you've  got to make sure that you have them to hand.  

And that's everything there. So those are  the 12 self-assessment expenses that you  

can and should claim for. Do remember that  the rules around self assessment expenses  

change quite frequently. You can view the  most up-to-date information for the tax  

year in our dedicated blog post on this very  topic, and you can find a link to that post  

in the description below. If you have any  questions, please do leave a comment and  

don't forget - if you want to be the first in line  to receive notifications for whenever we post  

new videos, just like this one, then make sure you  hit that 'Subscribe' button. We'll see you next time.

Cheerio.