The Self Assessment tax season is all about calculating how much tax you owe and making sure you pay it off within the deadline.
Naturally, we all want to keep as much of our hard-earned money as possible – and yet, every year, UK taxpayers miss out on so many Self Assessment tax deductions that could bring their bill down. Be smart and get help!
Have a professional accountant look over your returns and bookmark the Self Assessment expenses you are eligible for.
And to start you off, our team at 3E’S has compiled this list of tax deductions so you no longer have to frantically Google things like “What can I claim as Self Assessment expenses?.”
1. Home office expenses
This is one of the most commonly overlooked Self Assessment expenses. If you have a home office, then you are allowed to deduct the portion of the rent that goes towards its usage, as well as the electricity, gas, internet, and other expenses related to the home office.
You will, however, have to keep track of the usage portions for each item. So if you use your internet connection for work and leisure equally, you can only claim 50%.
2. Capital allowances
This covers any expense your business claims against taxable profit, including equipment, software, licenses, and so on. If you use the asset for business only part of the time, you can claim a partial capital allowance.
You can also claim a previously owned asset under your Self Assessment expenses – ask your accountant how to get values based on their first-time use for the business.
3. Vehicle expenses
Many self-employed people know they can claim business travel costs as HMRC Self Assessment allowable expenses, but the same applies to your personal vehicle, too! The next time you take your car out for work, you can add the mileage cost to your business claims.
If you take any employee or business partner, you can claim an extra 5p per mile. Other vehicle-related expenses you can claim include repairs and servicing, parking, vehicle insurance, hire charges, and license fees.
4. Work-related clothing
If you have work uniforms or safety clothing, you and your team need while doing business, you can claim those as Self Assessment expenses. However, this doesn’t extend to general workwear like shirts or trousers.
5. Legal/financial expenses
You can claim the cost of hiring an accountant, lawyer, or other professional as part of your Self Assessment tax return expenses.
Other expenses you can claim include bank charges, overdraft fees, leasing payments, interest on business loans, hire purchase payments, and payments related to alternate financing systems.
However, note that you cannot claim any legal or financial costs you have incurred by doing something illegal. Also, you cannot claim costs related to buying property or equipment except as capital allowance – and that, too, only if you use the traditional method of accounting.
6. Marketing expenses
This is another one of those Self Assessment expenses that people often forget about – but marketing can be expensive, so it is a real bonus!
HMRC lets you claim advertising expenses, mail marketing initiatives, free samples, web hosting, and so on. However, hospitality expenses are not part of the list.
7. Charity donations
If you made a donation to a registered charity or a community amateur sports club last year, you can add it to your list of HMRC Self Assessment allowable expenses.
However, remember that this only holds for sole traders and partnerships – if you run a limited company, ask your accountant how much tax you can claim back.
8. Unpaid invoices
This is one of the most beneficial HMRC Self Assessment allowable expenses, especially for small business owners. If you use the traditional method of accounting, and if there are invoices you are certain will never be paid, HMRC lets you claim the invoice amount as bad debt.
However, this does not extend to invoices related to purchasing assets like machinery or land and buildings. Also, if you use the cash basis of accounting, you are getting paid as and when you make the sale, so the question of unpaid invoices does not arise.
9. Staff costs
Whether you have full-time, part-time, or contractor employees, there are several Self Assessment expenses you are allowed to claim, including salaries and wages, agency fees, benefits, bonuses, pensions, business-related training costs, and employers’ National Insurance (NI).
10. Software and subscriptions
You can claim those costs if you pay for business software or any necessary business subscriptions (like relevant trade publications). However, check with your accountant whether any specific expense counts as one of your Self Assessment allowable expenses.
What if I incur job-related expenses?
As an employee, if you incur specific business expenses not reimbursed by your employer, you may be eligible for tax relief. This relief applies only to expenses directly related to performing your job duties. In the following sections, we explore various types of tax-deductible employment expenses and the process for claiming tax relief on these.
Types of expenses eligible for tax relief
Special tools and clothing: You can claim tax relief on the cost of specific work clothing or tools required for your job but not provided by your employer – for example, protective gear in construction or uniforms that are not ordinary clothing.
Expenses for employees working from home: If you are required to work from home, you may be able to claim relief for additional household costs incurred, such as increased electricity or heating bills.
Tax treatment differs based on whether you had a broadband connection before or after starting a home-based job. If the internet is mainly used for business, a portion of the cost can be claimable.
Other deductible employment expenses: This includes professional fees, subscriptions to certain organizations necessary for your job, and business travel expenses.
Office equipment purchase: Generally, the cost of home office equipment, like a computer or office furniture, is not eligible for tax relief. However, smaller consumable items used directly in your work, like printer ink or paper, may be claimable.
How do I claim tax relief as an employee?
You usually claim tax relief through your tax return. The relief is applied by reducing your taxable income by the amount of the allowable expense.
If your employer reimburses you for expenses, you cannot claim these for tax relief, as they are not considered out-of-pocket expenses.
If unreimbursed expenses bring your earnings below the minimum wage, certain protections apply. These expenses might also affect your eligibility for benefits like Universal Credit.
Different tax rules apply depending on whether you are required to work from home or choose to do so. Reimbursements from employers for home working expenses are typically tax-free up to a certain amount.
Moreover, there is no National Insurance relief for these expenses, and only those incurred ‘wholly, exclusively, and necessarily’ in the performance of job duties are eligible.
Over to you
Hopefully, you now have a better idea of how you can save money on your tax returns. And if you are worried about the cost of an accountant for Self Assessment, don’t be! At 3E’S, we pride ourselves on providing high-quality tax accounting services at affordable prices.
Reach out today to chat with our experts and take advantage of as many Self Assessment tax deductions as possible.