Business expenses as a Sole Trader

Business expenses as a Sole TraderWhatever your trade, you will incur costs as part of running your business. To help, we have created a short and informative guide to get you started on commonly claimed expenses as a Sole Trader. 

What is a business expense?

An expense is a cost that you incur in the course of running your business.  All expenses must be wholly or exclusively for the use of your business.  If an expense is only partially incurred for the business, you should exclude the personal proportion. 

How do I claim a business expense?

It’s very straightforward to claim a business expense. All you need to do is add up all of your expenses/receipts for the year and add the total into your annual self-assessment tax return. You should always remember to keep all of your receipts to prove that your expenses are legitimate. If you don’t want to keep paper copies of your receipts then you can keep digital copies, bit make sure you’ve got a backup copy! 

What business expenses can I claim for?

These are just some of most common business expenses that you can claim:

  • Travel expenses

This could be a number of costs such as fuel, insurance repairs and servicing of your own personal vehicle, based on the percentage this is used for the business, along with any parking expenses whilst on a business trip.  Plus, if you have to stay away from home, this can include the cost of any hotels and meals overnight.

You will not be able to claim the cost of any travel between home and your ‘base of operations’.  Your ‘base of operations’ could be your home or various sites, depending on the nature of your trade.

If you have not included the full cost of the vehicle as an expense and claimed capital allowances, you can use a simplified method of claiming for business mileage at 45p for the first 10,000 business miles and 25p thereafter each tax year.  The mileage allowance includes the cost of buying and running the vehicle (such as repairs, maintenance, insurance and fuel).

  • Working from home

If you work from home, you can charge a proportion of your running costs.  This can be for rent/mortgage interest, council tax rates, water and sewerage, light and heat and insurance costs. You need to then calculate the total of these costs and work out the business proportion by looking at the area used by the business and how long you are actually working in that space, then a percentage of costs for what is consumed by the business.

Or you can claim a simplified flat rate per month, based on the hours you work from home, this ranges from £10 to £26 per month.

  • Phone and Internet

For both telephone/mobile phone fixed costs and broadband, you can claim a percentage of the cost based on your business usage, in addition to the working from home claim above.

As for any business calls, you can use your itemised bills to claim for the specific cost.

  • Insurance costs

This will vary depending on the type of company you run, and the risks that you will face. However most Sole Traders will require:

  • Professional Indemnity Insurance – this will protect you in the event that you provide incorrect advice that causes your client a financial loss.
  • Public Liability Insurance – this will protect you if someone is injured or their property is damaged because of your business.
  • Employer’s Liability Insurance – you’ll only need this if you have an extra pair of hands to help you. This will cover any employees or temporary staff if they should want to make a claim against your business if they’re injured or fall ill whilst at work.
  • Stationery, marketing materials and advertising

Stationery costs could be for business documents, such as letterheads, business cards, pens, paper, etc.

Plus, any costs for promoting your business and advertising your business such as adverts in newspapers, website costs and direct mail are all deductible.  However remember any costs for entertaining current or prospective clients is not allowable.

  • Professional fees, including accounting and solicitor fees

If you pay an accountant to help with your affairs or submit your self-assessment tax return, you can offset this cost against your revenue.  Along with any other professional fees, such as solicitor’s if you need any legal advice.

  • Training courses

You can only claim for the cost of any training courses which relate to your current trade.  If you fancy learning any new skills for a potential future trade, this would not be allowable for tax relief.

  • Salary and other staff costs

This includes any costs for employing an employee for your business (excluding yourself).  You’ll need to make sure you’ve registered a PAYE scheme and are deducting the correct taxes, along with making the relevant submissions to HMRC.

Plus any bonuses, pensions and benefits provided to your employees.

There are lots of other expenses not detailed here such as books, clothing, tools and equipment.  This is not an exhaustive list and there will be other expenses that can be claimed, which specifically relate to your business.

How Aardvark Accounting can help you?

We’ll give you one point of contact and be here to answer any questions in a flash!

Whether you need us to complete your self-assessment tax return or you’re a small business that needs a more hands approach, we’ll do the “aard” work for you.

01425 471917 or contact us here