To operate your business, you require some products along with services, which demand a cost in the shape of investments. These investments are said to be business expenses. Being a sole trader, certain expenses are allowed to claim. That means that you will have to pay fewer taxes on them and get to keep your hard-earned money while some expenses do not come into counting.
What are allowable business expenses?
To calculate the profit of the company, expenses are also used. Allowable expenses decrease the amount of profit on which you would have to pay tax. To reduce the taxable profit, you just need to raise your allowable expenses. So that you would pay less income tax. Being a sole trader, you will be eligible to claim all the allowable business expenses and enjoy control on your expenses to save your cost from income tax.
You need to keep an accurate record of your expenses in order to claim. And you will be legally bound to keep those record for a duration of 6 years at least.
What expenses can be claimed as a sole trader?
Being a sole trader in the UK, you can claim back all the expenses you have incurred that are directly related to your business. But you need to make sure that you are only claiming for those expenses which are wholly incurred in your business and not in personal usage. If you are not so sure about it, it would be better to consult an accountant to have a clear record to sort things out. Though there are following business expenses categories that are said to be safe pledges.
Equipment and supplies
This is the most widened category in which you can enjoy claiming expenses. It simply includes all the supplies, equipment and materials that help you to run your office. You can count technology, i.e. computers, printers, and other machines, software and programs, stationery items such as notebooks, paper, office supplies, raw materials, and also furniture like tables, shelves, chairs etc. In short, everything you are keeping in the office that helps you to carry out business.
You can also claim the expenses for the accounting services you avail as long as they are only related to your business. If the accountant has spent time working on account of sole traders, you can claim the expense. Otherwise, for personal finances, they are not allowed to be claimed.
Phone and internet services
You can also claim on the phone and internet services you avail for the business as a sole trader. If you use the same gadget and service for both your professional and personal use, it will be tricky to claim on this situation.
So it is better that you keep the professional and personal expenses separate to save yourself from the struggle to claim. It will also be easier for you to keep a proper record.
Staff expenses are also allowable to claim. It includes the salaries of your employees, bonuses, pensions, allowances, training fee, and other benefits. It also counts agency fees, staff insurance and subcontractors.
If you are running your office from home, then everything which supports you to carry out your business will be included in allowable expenses. Such as furniture, computer, software. You can even demand a percentage pf your utility bills according to the relevant use in business.
You can enjoy claiming the expenses of all the professional subscriptions that are related to your business. For example, membership of trade, registration for your trade.membership of a club, such as a golf club if it is relevant for your business. For instance, business owners arrange and conduct business meetings with clients. This case will be valid, but if it is not linked with your professional work, it will not be count.
Training and course expenses
The training and courses you take to improve your business efficiency also count. You can claim on course fee, travel expense for the course, training accommodation etc. course expense claims are sometimes rejected when you try to get an additional degree.
You receive full tax relief on business travel expenses. It includes the fuel of your vehicle, parking, air tickets, food and accommodation if you are travelling overseas for business purpose.
Expenses that are not allowable
There are some expenses which you may count as business expenses, but they do not fall in the category of allowable business expenses. These are.
In the sole trader business, you and the company are the same legal body. Which means even though you make a donation from your business bank account, it will still be counted as your personal donation. And will not be allowable.
Medical care and insurance
For sole traders, unfortunately, health and medical insurance do not come under the category of allowable expenses. There are some rare cases in which you can claim, but usually, it is not allowed.