If you are self-employed or partially self-employed what are the dos and don’ts of expenses?

If you’re self-employed or partially self-employed, you enjoy much greater scope for tax offsetting, says Mike Warburton, tax guru at the accountants Grant Thornton.

Household expenses

If you use your home to conduct your work and your office accounts for, say, 20% of your household space, you can claim that same proportion of household bills, such as gas, electricity, water and council tax against your tax liability.

If you only use your home in a minimal way to conduct your business, such as writing up your business records, HMRC will now accept a £4 per week – or £208 a year – office deduction without quibbling

Internet and phone/IT

You can claim the cost of any business calls. In terms of line rental and broadband connection fees, a proportion of the cost can be claimed based on business use compared to total use.

If you buy a new computer or iPad, you may offset its proportional cost, so if it’s entirely used by the business, you may offset the whole cost. The same is true of software. You can claim for printers, stationery and trade journals.

Vehicles

Car and van insurance, repairs, servicing, fuel, parking, hire charges, vehicle licence fees, AA/RAC membership used as part of the employment, can all be offset against tax. However, you can’t claim for private motoring, or for speeding tickets.

Advertising/admin fees

HMRC allows all costs incurred for advertising in newspapers, directories, mailshots, free samples, and the cost of designing and running a website to be offset. The same is true of employing accountants, solicitors, surveyors, or architects, as well as paying any professional indemnity insurance premiums.

Bank and other charges

Bank, overdraft and credit card charges, hire purchase interest and leasing payments incurred as part of the business, are all tax deductible.

Clothing

You can’t claim is for clothes unless they are specialist items that are entirely used for work. A self-employed accountant could not claim for a new suit arguing he had to wear it as part of his work. However, if he also had tree surgery business, he could offset the full cost of steel toe-capped boots and a protective jacket, as well as the costs of running the chainsaw.

Entertaining

Taking clients out for lunch is now generally never tax deductible, even if they are clients and you are talking about work. The same is true of taking suppliers to sporting events or similar.

Source The Guardian.