8 often overlooked business expenses that could save you money

HM Revenue & Customs (HMRC) will allow you to claim lots of expenses. While most business owners probably already know about many of them, like office supplies, tools, and even your business vehicles, there are many more obscure deductions that could potentially save business owners hundreds of pounds. 

Whether you are a sole trader or self-employed knowing what you can and can’t claim as a business expense can be a learning curve. It might seem easier to overlook some of your expenses just to avoid the paperwork. However, doing this means your business could lose money and profits in the long run.

HMRC has very strict rules on what you’re allowed to claim as expenses when you’re self-employed or a sole trader, and it’s vital to get clued up on them before filing your tax return.

For self-employed expenses to be classed as allowable expenses, they must have been explicitly incurred due to the running of your business. 

To help, we’ve rounded up eight things you might not know count as a business expense – so you don’t have to.

1. Financial and legal costs

Many financial and legal costs will count as allowable business expenses and qualify for tax deductions. 

When it’s time to fill out your Self Assessment, don’t forget to include:

• Fees for accountants, solicitors, surveyors, and architects for business reasons
• Professional indemnity for insurance premiums
• Bank, overdraft, and credit card charges
• Interest on bank and business loans
• Hire purchase interest
• Leasing payments
• Alternative finance payments, like Islamic finance

Please note that legal fines you’re given for breaking the law can’t be claimed, for example – a speeding ticket when travelling to work.

2. Unpaid invoices and bad debt

If you’ve ever dealt with, or are currently dealing with, a tricky customer where any invoices and debts can’t be recovered, this business expense could relieve some stress. If you use traditional accounting, you can claim back money that you won’t be receiving from the customer.

These are called bad debts. You can only write them off if you’re sure they won’t be recovered in the future. It’s worth noting that you can’t claim them if you use cash basis accounting either. 

There are some exemptions, such as debts that are not included in your turnover and debts related to the disposal of fixed assets.

3. Tax relief on charitable donations

Individuals can donate to charity without paying tax if they give through Gift Aid, or from their wages or pension through Payroll Giving.

Any donations you make through the Payroll Giving scheme are taken before your income tax is calculated. This means you won’t pay income tax on the amount you donate, but National Insurance will be applied.

4. Tax on business phone lines

Paying for you or your employees to have a home phone can include expenses such as telephone line rental, business-related call charges, and private call charges. Better still, if the phone is only used for business calls, you don’t have to worry about deducting or paying PAYE or National Insurance (NI).

This means you can remove the cost of running the business phone line from your profits as an allowable business expense. 

5. Employee training payments

You can claim employee training costs as a business expense, as long as the travel, course, or textbooks are solely for work-related training. 

6. Employee clothing

You do have to report uniforms to HMRC, but you won’t have to pay tax or NI on most of them. This counts for protective clothing your employees need to do their job, and a uniform that they only wear for work. To be exempt from tax and NI, they’ll have to be essential work-specific items of clothing to class as an allowable business expense.

7. Marketing costs

Another allowable business expense you can claim on your Self Assessment is the majority of your marketing costs. HMRC allows businesses to claim for expenses like:

• Advertising in newspapers or directories
• Bulk mail advertising
• Free samples
• Website costs

There are some exceptions to this allowance, for example, you can’t claim for what you spend on event hospitality, or entertaining clients, suppliers, and customers. 

8. Tax relief on subscriptions

And lastly, businesses can add subscriptions and memberships to their expense claims if they’re work-related. If you have an annual membership with a professional trade organisation for example, make sure to add this to your file.