As a self-employed individual or a small business owner you are able to claim business costs – such as meals, accommodation, equipment and travel – as expenses, which are tax deductible. Sounds pretty simple right? However, expense claims work on a case by case basis, which means it can be confusing to know what costs are eligible expense claims.
In this Q&A session Lovely Kohli, expert Senior Accountant at Easy Accountancy, answers some of the most frequently asked questions from her existing clients regarding what they can and cannot claim as business expenses.
Q: I am a small business owner and have a team of eight people working for me. I would like to organise a Christmas party to reward everyone’s hard work this year. Can the cost be claimed as a business expense?
A: Your Christmas party could be classed as an expense provided that it adheres to HM Revenue and Customs criteria for a qualifying event, which is as follows:
- Be an annual event,
- Open to all staff,
- Cost less than £150 per guest.
Q: I’ve just started a new business and while we are getting off the ground I am working from home to keep costs down. Obviously I am now using more electricity than I was before, can I claim some of these extra household costs as an expense?
A: Yes. If you are working from home you could claim utility bills such as water, gas, electricity and mortgage interest. To work out the amount that you are able to expense you can calculate the proportion, which has been used for business. This amount is based on the size of your property, the number of rooms that are used for business and the percentage of time that those rooms are used for work. Alternatively, you can pay a flat rate of £4 per week, which encompasses all household costs.
Q: I own a small IT business. I’m feeling a bit out of shape compared to the rest of my team and my clients. To help me fit in at work and build better relationships with my clients I have hired a personal trainer, can this cost be claimed as an expense?
A: In this situation your personal training costs are not directly related to the running of your business and so cannot be claimed as a business expense. Personal training costs can only be claimed as an expense in unique situations such as if you are working as an acrobat.
Q: I work as a graphic designer and I use image editing computer software every day for work. Can this cost be claimed as a business expense?
A: Computers, iPads, laptops and software could be claimed as business expenses providing they are used solely for business purposes. In this case, if you use the image editing software solely for work then the cost can be claimed as a business expense. If you use the software for both business and personal use then you are able to claim the proportion of the cost that is used for business.
Q: I run my own start up digital marketing company. I have recently been cooking a lot in my spare time and would love to take up cookery lessons, could this cost be claimed through my company?
A: Sadly, cookery classes would not be directly related to the running of your digital marketing company and so cannot be claimed as an expense. Training courses are only legitimate expense claims when they are directly related to the running of your business, such as a beautician learning how to perform the latest skincare techniques.
To help self-employed individuals and small business owners learn what they can and cannot claim as a business expense, Easy Accountancy has created an innovative new infographic, which answers some of the most frequently asked questions regarding self-employed expenses.
The infographic was created in response to a report by the Office of National Statistics, which states that self-employment in the UK is at a 40 year high. As a result more people would be wondering what is and is not classed as a business expense.
To view the infographic please visit www.easyaccountancy.co.uk/self-employed-expenses-what-you-can-cannot-claim-infographic.