If you’re self-employed, your business will have various running costs. You can deduct some of these costs to work out your taxable profit as long as they’re allowable expenses.
Allowable expenses don’t include money taken from your business to pay for private purchases.
office costs, eg stationery or phone bills
travel costs, eg fuel, parking, train or bus fares
clothing expenses, eg uniforms
staff costs, eg salaries or subcontractor costs
things you buy to sell on, eg stock or raw materials
financial costs, eg insurance or bank charges
costs of your business premises, eg heating, lighting, business rates
advertising or marketing, eg website cost
If you use something for both business and personal reasons you can only claim a portion for the business. For example if your mobile phone bill for the year is £130 and £70 of this is for business you, then you can only claim the £70.
If you work from home you may be able to claim a portion of your costs for things like heating, electricity, council tax, rent/mortgage, internet use.
For example if you have 4 rooms in your home, one of which you use only as an office.
Your electricity bill for the year is £400. Assuming all the rooms in your home use equal amounts of electricity, you can claim £100 as allowable expenses (£400 divided by 4).
If you worked only one day a week from home, you could claim £14.29 as allowable expenses (£100 divided by 7).
You can avoid using complex calculations to work out your business expenses by using simplified expenses. Simplified expenses are flat rates that can be used for
working from home
living on your business premises
Please take a look at our previous blog post for more information. Simplified Expenses