It’s that time of year again when you are being asked about interest received on old building society savings accounts and trying to find out where the dividend vouchers are. But there are millions of self employed people who miss out on the opportunity to save tax by not claiming the below expenses.
1. Phone expenses
You are entitled to claim back phone expenses even if you use your work phone for personal use. It just means you can only claim for a percentage of the bill. The best way to do this is to calculate the time you spend using your phone for business use, work this out as a percentage and multiply this by the phone bill.
2. Professional fees and subscriptions
If you happen to be a member of a professional body, such as IFA (Institute of Financial Accountants or FTA (Federation of Tax Advisors) as I am, then this would be classed as a tax deductible expense. Membership fees and license fees qualify as such but your membership must be related to your business and sector. If it’s a one off, lifetime membership fee then I’m afraid this won’t count, it must be a monthly or annual subscription to qualify.
If you’re not sure whether or not you’re membership is an approved professional body, then you can check the list of qualifying bodies on the HMRC website
If your business does not have a vehicle (like a van) then you may be using your own car to get around
If you use your own car for business related journeys then you are entitled to claim ‘mileage allowance relief’.
Mileage allowance relief covers road tax, fuel, MOT, repairs and general wear and tear. This covers all types of vehicles whether it’s a car, lorry, bike or van, providing it is used for business use.
In order to work out your business related mileage, total up the number of miles travelled for the particular tax year and then multiply it by the rates according to HMRC.
It’s important you keep an accurate record of your mileage in case HMRC asks you at a later date. You need to keep records of the start and finish postcodes of each journey you make and on what dates. If you commute to the same place of work each day, then this cannot be taken into consideration. However, if you commute to various other locations, ie visiting customers/suppliers then this will qualify.
4. Laptops & Software
Purchases which you make for the sole purpose of your business that will be used over a long period of time such as a computer, printers, plant or machinery and office furniture are classed as an asset and you can access tax deductions called Capital Allowance.
Visit the HMRC website to determine what qualifies as an asset. You can claim for the original cost as long as you keep a record of the purchase.
If you lease large items such as computers then this won’t qualify and neither will items which are purchased for personal use.
Have you heard of AIA (Annual Investment Allowance)? AIA enables you to claim the full purchase amount of the asset within the same year you have bought it. As a Sole Trader you can use the ‘cash basis’ approach, reporting income and expenses based on payments which you have made as an alternative to ‘accruals basis’. You don’t have to consider capital allowances if you take the cash basis approach.
Training is also tax deductible but only providing that it’s relative to your line of work and you’re trying to improve your current knowledge and skills.
If you’re trying to diversify your business by training in order to learn new skills, then this would not qualify as it would be classed as an investment rather than an expense.
An example would be a web designer who wants to also offer fitness training as a service although they have never qualified in this line of work before. Becoming a fitness trainer is not essential to a web designing business, so therefore it would be an investment rather than an expense.
Every business is different so providing you can provide justification that the training is essential for your current line of work then you can make the claim.
If you need guidance or support with your expenses then please book a call with me.