Business expenses – everything you need to know to boss them

What can I claim as a business expense?

Business expenses can be deducted from your taxable profit, helping to keep your business in the black. Generally, you can claim for any costs that are vital to keep your business running.

Once you’ve added up your essential business expenses, you can subtract this figure from your total taxable profit. You’ll then only be taxed on the remaining amount.

What counts as a business expense?

If you need an item to properly run your business that will only be used for business purposes, the chances are you can claim its cost back. For example, you can’t claim for a games console as you won’t need this as a tradesperson.

Some examples of allowable business expenses are:

• Office running costs – Electricity, gas, water, rent/mortgage
• Travel expenses – Petrol/diesel, parking, van leasing
• Work tools
• Workwear – You can only claim for clothing that you use at work, for example, uniforms or overalls
• Other costs – Mobile phone, training, PPE

The expenses test

HMRC’s method of determining what makes something an allowable expense focuses on one simple question: can you prove that the thing you’re trying to claim as an expense has been purchased wholly and exclusively for work purposes?

For example, if you’ve bought some steel-capped boots and can prove that these are for work purposes to prevent injury at work, then you can claim them. If however, you plan on wearing them out on the town at the weekend, then they’re no longer solely for work purposes, and can’t be claimed as an expense. So where does that leave travel expenses and professional subscriptions?

Travel expenses

You can claim both travel expenses and professional subscriptions back as an expense, so long as you can meet the HMRC’s ‘wholly and exclusively’ test.

So let’s say you’re a contractor based in south London, and you’ve been hired to help out with a job in Watford or Tottenham. To get there, you’re going to need to take the train/tube and maybe even take a bus. Because this journey is solely for work purposes, you’ll be able to claim back the cost of your train and bus tickets as a taxable expense.

If you drive there instead, you can claim back business mileage.

The only exception to this rule is if the place you’re travelling to is a permanent workplace or office. So if you’re based out of a business office, you cannot claim the mileage from home to your office. However, you can claim any mileage to your clients to carry out work.

Other travel expenses, such as tolls, congestion charges, parking fees, and parking permits can also be claimed as a business expense, just so long as you can prove that any of these fees were incurred solely for business purposes.

If you’ve got your own company car or van, you can even claim for breakdown cover, repairs, and servicing. However, you can’t claim parking fines as an expense.

Professional subscriptions and training expenses

Professional subscriptions such as membership of a trade body that you need to be a part of in order to trade (for example, the Gas Safe Register) are allowable, provided they are HMRC approved professional bodies relevant to your employment. If it is not directly relevant, then it’s not allowed.

Professional courses and training can be a slightly more complex area. You can claim for training that’s aimed at improving the skills you apply in your work. Additionally, you can claim travel and accommodation while attending a training course.

HMRC often disallow expenses for courses such as MBAs, as they offer new skills and knowledge rather than building on existing skills. In certain situations, they are allowed, but only if you demonstrate that they are reinforcing/improving your existing knowledge/skills.

Different types of expense and whether you can claim them

Working out what can be claimed as a business expense may be a little confusing. To help you figure it out, we’ve listed some of the most common business expenses below and whether or not you can claim for them:

Can I claim a laptop as a UK business expense?

This really depends on whether you need a laptop to run your company. For example, a laptop may be necessary if you need to mock-up designs or drawings.

You also need to consider if you use the laptop for other purposes. For example, if you only use the laptop for work 10% of the time and the other 90% is personal use, you can only claim 10% of the laptop cost.

Can I claim for car business expenses?

Many tradespeople use a car or van to move tools and materials from job to job. If you use your vehicle in this way, you can claim it as a business expense. However, if you use the van for personal trips too, you can’t claim 100% of its cost. You may also be able to claim for insurance, fuel, parking costs, breakdown cover and repairs.

Can I claim my mobile phone as a business expense?

Yes, if you use it to contact your customers or to access business apps. But if you use the same mobile for business and personal use, you’ll need to only claim for the time it’s used for business purposes.

Can I claim broadband as a business expense?

Thankfully, if you have a home office or business premises you can claim for broadband. This cost should be pro-rata based on the amount of time you use your broadband for business and personal use.

Can I claim glasses as a UK business expense?

This is a little tricky as generally, you can’t claim for glasses as a business expense. However, if you need them for work, for example, if you use a laptop, you can claim for the cost of your eye test.

Can I claim coffee as a UK business expense?

Generally, no, as coffee is not essential to running your business. Although, if you’re away for business overnight or making a trip that’s outside your usual workday you may be able to claim for coffee.

Can life insurance be claimed as a business expense?

Life insurance is essential for anyone looking to protect their family in case something happens. But can life insurance be a business expense? Surprisingly, you can claim life insurance but only if you take out the policy through your business. You can’t claim for personal life insurance.

Can I claim lunch as a business expense?

Normally, no, you’ll need to buy lunch whether you’re working or not so this is not considered as a business expense. However, you can claim for lunch on business trips, but this only covers basic food, not extravagant meals.

Claiming rent as a business expense

If you own business premises like a retail establishment or workshop, claiming rent as a business expense is allowed. What’s more, if you work from home, you can claim a portion of your rent back, based on how much time you spend working from your home office.

Can I claim a watch as a business expense?

Watches are not considered essential for work so you can’t claim these as a business expense.

Examples of tax-deductible expenses for a UK limited company

UK limited company tax-deductible expenses include:

• Marketing
• Rent
• Electricity and gas for your home office
• Business equipment
• Mobile phone and laptop (if used exclusively for business)
• Travel expenses
• Start-up costs
• Pension

FAQs

What expenses are business expenses?

Any expense that is needed for the proper running of your company.

Can I claim expenses from previous tax years in the UK?

Yes. You can claim for expenses that you paid out for up to four years ago.

What are business expense tracking apps?

You may have heard about business expense tracking apps that can help you run your company. These apps allow you to keep detailed records of your business expenses. You can also log receipts and invoices, so everything is in one place. These apps really help to save time when you’re working out how much in expenses to deduct from your taxable profits.

One of these apps is the Powered Now app. All Checkatrade members get free access to Powered Now’s invoicing app, 1 Trade App*. The 1 Trade App allows you to manage your business on the go, create nice looking invoices and quotes, and lets customers pay you quickly.

Or, you can get 30% off if you upgrade to the full Powered Now app in your first year with Powered Now**.

The upgrade to Powered Now adds team scheduling and tracking, the ability to accept card payments, and to submit VAT returns directly to HMRC.

There are many other benefits to becoming a Checktrade member, including savings on insurance, vans and discounts at wholesalers.

Are travel and professional subscriptions allowable expenses?

Again, this is determined by HMRC based on whether you need travel and professional subscriptions to run your business. Often this does mean you can claim for these expenses but to learn more, please visit our allowable expenses guide.

How can I save money on business expenses?

As a self-employed tradesperson, you’ll know that every penny counts. Luckily there are ways you can save money on business expenses. You can read about these options in detail in our money saving tips guide but one of the best ways to cut your expenses is by becoming a Checkatrade member. You’ll have access to exclusive member discounts on everything from tools to your van.

Summary of what you can claim as a business expense

• A business expense is anything that you need to pay for to properly run your business.
• Business expenses include rent, tools, insurance and more.
• If something you own is used for both business and personal use, you can only claim back a percentage of the cost. For example, if you use your laptop for business only 20% of the time, you can only claim back 20% of the cost.
• You can make incredible savings by joining Checkatrade. Plus, we’ll help to grow your business by providing new customer leads and free marketing materials.

*Offer is valid until midnight December 31st 2022. Offer is valid for non-current subscribers to Powered Now.

**The offer is valid for new subscribers to Powered Now only. The offer will be applied to the first consecutive subscription up to 12 months. All new subscribers will receive an initial 2 weeks free of charge trial period. The offer cannot be used in conjunction with any other offer.