Does your business change during the summer months? 
Do you need to stock-up on supplies or materials or prepare for a busy autumn? 
You might hold a summer barbecue to say ‘thank you’ to your customers and suppliers. 
Are you sure you are keeping track of all your allowable business expenses to help minimise your tax liability? 
Allowable expenses for self-employed people 
If you are self-employed as a freelancer, contractor or sole trader you will pay income tax on your taxable earnings. If you are the Director of a limited company you might pay yourself a salary, so things are a little different. 
You will need to complete a self-assessment tax return each year, so you will want to be sure you take account of all your expenses that can be deducted from your income before you pay tax. 
As a sole trader or freelancer, all your income above your personal tax allowance will be taxable. You will pay 20% on earnings above your allowance, 40% on earnings above the basic rate limit of £37,700 and 45% on earnings above the higher rate limit of £150,000. 
However, you won’t be taxed on money you need to spend to keep your business running. Costs directly related to your work such as travelling to see clients can be deducted from your income before you pay tax and are known as ‘tax deductible’. 
Your taxable income – an example 
Sometimes an example helps: if you have invoiced £40,000 during the tax year, and you have £5,000 of allowable expenses, your profit will be £35,000. 
You are allowed to earn £12,570 (which is your personal tax allowance for 2022 to 2026) before you start to pay tax. So, you will be taxed at 20% on £22,430. 
If you hadn’t claimed your £5,000 of allowable expenses you would have tipped into the next tax band, paying 40% tax on some of your earnings, meaning you would pay an extra £1,920 in tax. 
So, you can see that claiming all your allowable expenses can make a big difference to the amount of tax you pay. 
What are allowable expenses for self-employed people? 
These are some of the most common allowable expenses you can claim: 
Office supplies – this can include stationery such as promotional postcards with a summer theme, for example, plus printing costs and printer ink, postage, phone and internet bills and software used for under two years or on a subscription. 
Office equipment – if you use cash basis accounting you can claim expenses for certain business equipment including fans to keep you cool in the summer months, computers, printers and software used for more than two years. If you use traditional accounting you will need to claim capital allowances on these items as assets instead, although the government is currently reviewing capital allowances from April 2023
Working from home – if your office is in your home you might be able to work in the garden on sunny days. During the year, you can claim for a portion of your heating, electricity, council tax, rent, internet and phone use. The proportion of your home expenses you can claim can be based on the number of rooms in your home. There are also other options that will help you avoid over-claiming or under-claiming. 
Business premises – if you have business premises you can enjoy a walk, cycle ride or drive to them in the summer, but you can’t claim for your journey to work. You can claim your rent, business rates, utility bills, building insurance, maintenance, and security. However, if you buy your business premises the purchase can’t be claimed as an expense. 
Transport – if you like to get out and about in the finer weather, you can claim tickets and fares for work-related travel other than to and from your premises. If you drive yourself, you can claim vehicle expenses at a flat rate per mile. 
Professional costs and charges – you can include the fees of professionals you use for business reasons such as a bookkeeper, accountant, financial adviser, or solicitor, and your bank charges. 
Materials and stock items – when you need to purchase raw materials or stock for the autumn and winter months you can claim these. 
Marketing – of course you will need to promote your business with plenty of summer-themed offers and promotions and you can claim these costs too. 
Professional insurance – most clients will want to know that you have public liability insurance and professional indemnity insurance all year round, but did you know that you can also claim travel insurance for work-related journeys? That won’t cover your summer holidays though. 
Clothing – if you need a special uniform or type of clothing for your work you can claim this as an allowable expense, but not day-to-day wear like summer shorts and flip-flops. 
Trade and professional subscriptions – membership of trade or professional organisations is an allowable expense along with subscriptions to professional publications. 
Tax-free trading 
You can claim a tax-free trading allowance if you earn £1,000 a year or less from self-employment. You don’t have to register for self-assessment or notify HMRC, unless you are asked do so. If you are likely to have significant expenses you might want to register anyway and benefit from things like maternity allowance and making Class 2 National Insurance (NI) contributions
Unfortunately, you can’t claim for the cost of your business summer barbecue or other entertainments – you can still enjoy them though. 
If you would like to find out more about allowable expenses for your business please get in touch. 
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