Allowable v Disallowable Expenses

We all know that when you run your own business, there are inevitably going to be some expenses that you incur along the way – be that from start up or on-going charges such as rent, IT, advertising or entertaining.

What can be a downfall for many, who don’t use a bookkeeper or accountant is just what exactly is an ‘allowable expense’.  If an expense is incurred solely for business purposes, these are generally allowable. This type of expenditure is usually referred to as 'Wholly & Exclusively'.

Examples of allowable expenses include:

Office Expenses: business stationery, printing costs and postage

Travel: parking, rail, air or taxi fees, hotels, accommodation, fuel (business only) or flat rate mileage can all be claimed

Clothing:  uniform (with your logo) or specialist health & safety workwear

Financial costs: insurance that you require to run the business, banking or credit card charges and legal and professional fees

Costs relating to business premises: heating, lighting, security, rent and business rates

 

Advertising or marketing: websites, social media marketing, leaflets and mailshots, branded items such as pens or mugs

Training courses:  Continuing Professional Development for existing business but not for new skills

Use of home as an office: you can claim a proportion of the utilities, internet and telephone, mortgage interest or rent based on the number of rooms you use to work within divided by the % business use

See this infographic for more info on Sole Trader https://www.freeagent.com/guides/expenses/working-from-home-expenses-sole-traders/

and Limited Company https://www.freeagent.com/guides/expenses/working-from-home-expenses-limited-companies/

Examples of dis-allowable expenses include:

Customer gifts:  We want to say thank you sometimes for the clients that have given you a referral or that have helped you out but these are dis-allowable with some exceptions – e.g gifts that carry an advert for your business

Entertainment:  Entertaining clients, suppliers and customers, or event hospitality are not allowed however, entertaining employees is allowable providing you don’t entertain them too much for it to be considered a taxable benefit (e.g over £50 per item)

Legal Costs:  Costs relating to legal fees to defend personal reputation or fines and penalties are disallowed.  You may however claim fees if related to the day to date activity such as chasing bad debts.

This is by no means an exhaustive list and is updated regularly by HMRC.

Check out all the videos and webinars on the link below https://www.gov.uk/guidance/help-and-support-if-youre-self-employed