Top 15 Self-Assessment Expenses You Can Claim to Minimize Your Taxes

Ryan Patrick

• 15 min read
Top 15 Self-Assessment Expenses You Can Claim to Minimize Your Taxes

Financial management is a crucial aspect of entrepreneurship, and being able to navigate the complex nature of accounting can be challenging for those new to running a business. Aside from the regulatory obligations to bodies like HMRC and Companies House, one integral requirement often overlooked by business owners is registering for Self-Assessment.

Self-employed individuals, including limited company directors, shareholders, and members of LLPs and sole traders, must submit Self-Assessment tax returns annually. This process requires that earnings are properly scrutinized in relation to the tax liability lying on the profits of the previous year.

Fortunately, the UK Government understands that there are several expenses inherent in running a business, and for this reason, affords entrepreneurs a chance to offset particular business expenses against their profits. This strategy is executed through Self-Assessment and helps entrepreneurs minimize their tax returns. Really, legitimate business expenses can reduce the tax burden in no small way.

This article offers a long list of 15 Self-Assessment expenses overlooked yet heavily beneficial to reduce tax bills. By leveraging these allowable expenses, you can optimize your tax efficiency and ultimately minimize your tax obligations.

What is self-assessment?

Self-assessment is a compulsory procedure in the UK, necessitating self-employed individuals such as sole traders, directors of limited companies, shareholders, and members of LLPs to submit their annual tax returns to HMRC. During this process, individuals disclose their earnings, encompassing profits derived from self-employment, investments, dividend income, rental income, and other income sources.

Additionally, individuals are required to report their expenses incurred throughout the preceding tax year, which can help alleviate the tax burden under certain circumstances. Navigating the topic of self-assessment can prove daunting and time-consuming, particularly for those not used to how the UK tax system works.

For this reason, many opt to enlist the services of an accountant to oversee the self-assessment process on their behalf. This avenue offers a streamlined and stress-free approach to ensuring compliance with HMRC regulations, minimizing the likelihood of errors or oversights.

A proficient accountant can aid individuals in identifying permissible expenses eligible for a claim, thereby reducing their tax liability and bolstering potential savings. Moreover, they ensure the correct application of tax codes and remain abreast of any regulatory amendments or updates. But if you do not want to employ the services of an accountant, it makes sense to have an idea of how self-assessment expenses work and how you can claim some of them to minimize your tax bills.

Who Needs to Submit Self-Assessment?

For those drawing pension funds or whose salaries are paid via the system of PAYE payroll, your revenue tax is already deducted at source, so there’s really no need to fill out a self-assessment tax return. But not everybody is in this category. Hence, below are some examples of individuals who typically need to complete a self-assessment tax return, although this is not an exhaustive list:

  • Self-employed individuals operating as sole traders with earnings surpassing £1,000.
  • Individuals holding multiple jobs concurrently.
  • Retirees receiving a pension while also earning income from employment.
  • Directors and partners affiliated with limited companies.
  • Individuals earning a certain threshold from investments, including property.
  • Ministers of religion.
  • Recipients of child benefits whose earnings exceed a specific threshold.
  • Individuals who have received a P800 form from HMRC, indicating insufficient tax payments.
  • Directors of limited companies and shareholders receiving over £1,000 in dividend income.
  • Partners (members) within general partnerships and limited liability partnerships (LLPs).
  • Employees claiming expenses exceeding £2,500 per tax year.
  • Individuals with an annual income surpassing £100,000.
  • Individuals earning rental income exceeding £2,500 from UK property or land.

What are the 15 Self-Assessment Expenses you can claim to minimize Tax?

Use these 15 self-assessment expenses to minimize your taxes.

1. Mileage costs

One self-assessment expense you should leverage to minimize tax returns is mileage allowances. For each mile travelled for work in a car or van, you're eligible for a deduction of 45p from your tax bill for up to 10,000 miles. Beyond that threshold, the deduction decreases to 25p.

For instance, let's say you covered 11,000 business miles last year, you can claim £4,500 in Self-Assessment expenses for the initial 10,000 miles and £250 for the remaining 1,000 miles, totalling £4,750 in eligible deductions.

Motorcycles qualify for a flat rate of 24p per mile under simplified expenses. Additionally, bicycles allow a deduction of 20p per business mile. But it doesn’t stop here, and there are other travel costs you can claim on self-assessment to reduce your tax bill. Some of them include:

  • Vehicle insurance
  • General vehicle repairs or servicing
  • Fuel or diesel
  • Parking space
  • Hire fee
  • Fees for vehicle licence
  • Breakdown cover
  • Transport fares for train, air, taxi or bus,
  • Hotel rooms
  • Meals on overnight business trips

Vital to add is, that no permission is granted for claiming travel or driving expenses not related to business or regular travels between your place of work and your home.

Another self-assessment expense you can claim to minimize tax bills is the cost related to professional staff(s) that you hire to assist your business growth. Professionals like architects, accountants, solicitors, etc. In addition, you can claim self-assessment expenses on insurance and bank costs, as well as for insurance premiums for professional indemnity. More specifically, you can claim legal and finance expenses on:

  • Payments for lease
  • Interest gotten from business and bank loans
  • Charges on credit cards and overdraft
  • Interest on hire purchase
  • Alternative finance payments like Islamic finance

Take note, permission is not granted for legal costs related to machinery or the purchase of property unless you wish to classify them as capital allowances, but this can only happen if you leverage traditional accounting and not cash-based accounting. Lastly, if you had to incur legal or financial expenses for breaking the law, you are not permitted to claim it as self-assessment expenses.

3. Office supplies

If you're searching for eligible business expenses for your Self-Assessment return, your desk might be the perfect place to also look. This is because HMRC grants permission for several self-assessment expenses related to office supplies to be claimed. Some of them include:

  • Your desktop and mobile phone device
  • Fax machine
  • Postage expenses
  • Costs for business stationery
  • Printing expenses
  • Cost of Printer ink and cartridges
  • Any less than two years old computer software used in the business

Your self-assessment expenses for minimizing your tax bill even apply to items such as laptops, tablets, and home computers, provided your claim on them is for business purposes. In certain cases, you might need to treat bigger purchases like computers and high-end software as capital allowances when claiming expenses. For instance, if you bought a family computer last tax year and utilized it for business purposes only half of the time, you can only claim its cost as a business expense proportionate to its use.

4. Charitable Donations

The donations you made last year could be crucial for reducing your tax burden on your Self-Assessment tax return. These contributions are allowable expenses and deserve careful consideration. A common name for these donations is tax relief. Tax relief applies to all individual donations made to registered charities or community amateur sports clubs (CASCs), rendering them entirely tax-free. The relief hinges on the method of fund donation, typically encompassing various channels. Some of these channels for expressing them are:

  • Gift Aid
  • Donations stipulated in your will
  • Direct deduction from wages or pension through a Payroll Giving scheme
  • Contributions in the form of land, property, or shares

This means, as a higher rate taxpayer you can claim back as much as £250 on every £1000 donated. It's important to note that charitable tax relief rules extend to sole traders and partnerships but do not apply to donations made on behalf of limited companies.

5. Unpaid invoices

This is one of the most beneficial (at the same time unused) Self-Assessment expenses. Hence, even if you neglect to claim other self-assessment expenses as a business owner, do not forget to use this one. First, there is something called ‘bad debt’, which is a certain income added to your turnover that you made no plan to collect. HMRC permits you to claim this income as long as you leverage traditional accounting. But the condition to claim this as an expense is that beyond any reasonable there is no chance of getting the money back. To be more specific, there is no permission for self-assessment to be claimed on a debt:

  • from an error in your calculations
  • connected to fixed assets arranged for disposal like big machinery, lands and buildings, etc.
  • excluded from turnover
  • if your accounting is tied to cash, because while the money has not been paid by the debtor, cash-based accounting only takes note of the money on your return which in an actual sense has been received.

6. Marketing costs

In your annual Self-Assessment return, it's crucial to note that certain expenses cannot be claimed, including entertaining clients or suppliers, and event hospitality costs. However, amidst these limitations, business owners often overlook the potential deductions available for marketing expenses.

These costs encompass a wide view, ranging from traditional advertising in newspapers or directories to modern digital strategies like bulk mail advertising, also known as "mailshots." Moreover, the production and distribution of free samples constitute another facet of marketing expenses that can be claimed. Furthermore, website hosting and maintenance costs are also eligible for deduction.

This includes expenditures incurred in ensuring the seamless functioning and upkeep of your online presence, which is an important component in today's digital world. While navigating the topic of allowable deductions, it's essential to recognize the significance of marketing in propelling business growth.

Investing in promotional activities not only enhances brand visibility but also cultivates customer engagement and fosters long-term relationships. By leveraging these deductions effectively, business owners can maximize their tax savings while strategically positioning their brands for success in an increasingly competitive marketplace.

7. Clothes

For clothing self-assessment expenses, you are not permitted to classify your entire wardrobe. But some of your wears can be grouped as an allowable expense which you can leverage to minimize the cost of your tax bill once each financial year closes. Here are some of the wears with permission:

  • Work-related uniforms met for working
  • Safety wear needed for work
  • For comedians or generally entertainers and actors, costumes wear

For allowable expenses on travels, you can deduct most of the travel expenses, which is not permitted in clothing expenses for your tax return calculations. Hence, only direct work-related wear is allowed.

8. Staff costs

If you employ permanent workers, seasonal employees, or contractors to help you run your business, you can claim a wide range of expenses associated with their employment when filing your Self-Assessment return. Though not very popular, expenses for staffing is one self-assessment way to cut your tax bill return expenses.

Whether your staff are seasonal workers, permanent or contract-based, you can minimize tax from their expenses. Specifically, you can cut taxes on; fees for training staff, bonuses for good work done, regular employee salary, pensions, national insurance for employees and agency fees.

Note though, that not all expenses for staffing are permitted by HMRC to be claimed for self-assessment. For instance, expenses associated with housing a nanny or babysitter are not allowed.

9. Subscriptions

There are different subscriptions that can be claimed to minimize tax. But first, if you are a subscriber to a membership package for charitable donations, you are not permitted to subscribe as a self-assessment expense for tax bill returns. It's essential to recognize that these expenses fall under the category of charitable donations which is subject to its own specific rules and regulations.

Similarly, when considering claimable expenses, it's crucial to also point out that personal subscriptions, such as gym memberships or glossy magazines, are not eligible for deduction. In addition, payments to political parties do not qualify as claimable subscriptions under the Self-Assessment system.

However, for subscriptions that add to your knowledge and help you run your business better, for example, subscriptions to professional bodies, trade publications, and academic journals, you can claim self-assessment expenses on them. Additionally, memberships in professional organizations or unions are also considered eligible expenses.

The reason these permissions are granted for these subscriptions is because of the vital role they play in staying abreast of industry trends and developments. These subscriptions serve as valuable resources, providing insights and knowledge crucial for professional growth and advancement. Hence, you should go on to claim them.

10. Your mortgage and utilities

When working from home, you have a variety of expenses eligible for claiming on your Self-Assessment tax return. These encompass utilities such as gas, electricity, water, broadband, and telephone bills, which can be attributed as allowable expenses.

However, similar to considerations regarding your family computer, there are essential points to remember when claiming home-related expenses under self-assessment. For example, if you work from a 5-room apartment (toilets, kitchens and bathrooms are not included), and a specific room is designated for business-related matters, you can claim 20% of your yearly costs as Self-Assessment expenses on tax bills. This also works for mortgage interest, as long as it is not an annual rent cost or capital repayment.

It is however essential to avoid dedicating a room in your home solely for business purposes, as this can have implications for Capital Gains Tax if you decide to sell your property. Instead, if a room serves another function, such as a spare bedroom, or if you only work from home part-time, you must allocate the associated costs based on business usage.

While HMRC doesn't offer precise instructions on this matter, you're required to distribute the expenses between business and private use in a fair and reasonable manner.

11. Pension Contribution

Contributions to registered pension schemes are expenses that can be deducted when calculating self-assessment in the UK and provide a tax-efficient way for people to plan for their retirement. The tax relief applies to personal and occupational pension funds, with contributions made within HMRC's annual contribution limits. By maintaining accurate pension contribution records and ensuring compliance with HMRC regulations, individuals can maximize their tax benefits while securing their financial future through strategic retirement planning.

12. Council tax

A lot of Self-Assessment users tend to forget about council tax when calculating their business expenses for the year. But just as you’re permitted to count a portion of your mortgage interest/rent or utility bills against the cost of your tax bill, you can also factor in part of your council tax bill. Many business owners leveraging self-assessment usually do not remember that council tax can be added to calculations and claimed expenses to minimize tax returns.

But it is. However, permission is not granted for a portion of utility expenses or mortgage rent/interest to be added to a tax return bill. Additionally, the same rules are employed in terms of how to calculate the money you’re permitted to chalk up as an expense.

If for instance, 30% of the space in your property is recorded for a home office account, then permission is granted for 30% of the cost of your council tax to be claimed on the annual Self-Assessment tax bill.

13. Flat-rate simplified expenses

Among all the self-assessment expenses you can employ to minimize your tax bill, flat-rate simplified expenses should be at the top. This is because for partners and sole traders in a partnership business model, and with the condition of working from home for a minimum of 25 hours per month, HMRC permits a flat rate, no-quibble deduction.

In addition to the simplified flat rate, broadband or telephone expenses can be claimed separately. These costs are not covered by the flat rate, allowing you to include them as Self-Assessment expenses on your tax return. This amounts to an annual deduction of £312 which can be added as Self-Assessment expenses on your tax return. These deductions amount to £26 per month (2022/23 and 2023/24 tax years) when working from home for a minimum of 101 hours each month.

Even though flat-rate simplified expenses are not difficult, and in fact quick to be added on a Self-Assessment tax return, usually, they go missing as an opportunity to deduct more business costs from tax bills. In this regard, HMRC has an online expense calculation tool. With it, you can resolve whether it’s better to claim flat-simplified expenses or figure out and use the actual expenses of working from home.

14 Health and Safety Charges

Due to the importance of safety and compliance in the workplace, a deduction is allowed for expenses related to compliance with health and safety regulations on business premises when submitting a self-assessment. The cost of safety equipment, training programs, and inspections are considered expenses, with records of expenditures and compliance measures supporting eligibility for these deductions. Prioritizing health and safety not only promotes a safe work environment but also provides tax incentives that reduce tax liability while increasing compliance and employee well-being.

15. Software Subscriptions

When filing a self-assessment in the UK, individuals can deduct fees related to software licences, subscriptions to business-related publications and online services that are necessary to run a business. With this, taxable income and tax liability is reduced, and efficiency and productivity increases.

Tracking member financial statements and invoices ensures accurate reporting and assists in applying these cost-minimizing expenses. By investing in software and payments tailored to business needs, individuals not only increase productivity but also gain tax benefits by aligning their financial strategy with the company's growth goals.

How to Register for Self-Assessment

To claim the dividends of cutting costs on your tax bill through self-assessment, you need to register for it. Depending on the business model your business is operating, here is how to go about the registration.

Register for Self-Assessment as a self-employed sole trader or partner

For sole traders or partners in partnership business, you can register online. Note, however, that a strong password is needed in addition to setting up a Government Gateway account.

First, your screen will pop up a User ID.  Once you have that filled in, your personal and business details will be requested by HMRC, which will be employed to have you enrolled in the online service Self-Assessment. The stipulated time for this will range from 10-15 minutes. The process is not complex though.

Upon completion of this registration step, an acknowledgement letter will be forwarded to your business address by the HMRC BOARD. The letter will have in it, a Unique Taxpayer Reference. When you receive this, provide this number to file tax returns and pay tax.

After this step, an activation code will be sent to you. This will be done through another letter. As part of the regulations, it is mandatory to have this code used within 28 days or risk having your account activated for filing the Self-Assessment tax returns.

Register for Self-Assessment as a limited company director

It can take a little longer to fully register, but it is still relatively straightforward:

To initiate and complete registration for Self-Assessment as a company director can take a while, but it’s still an easy-to-follow process.

First, take an SA1 form online and have it completed. In approximately 10 working days, a Unique Taxpayer Reference (UTR) will be forwarded to you.

Note that this UTR is not the same as the one for your company. As soon as the UTR is received, set up a Government Gateway account and password, to facilitate online enrolment for Self-Assessment services.

When this is done, a User ID will be displayed on the screen, followed by a code to fast-track the activation, which typically takes place in around 10 working days.

Similar to registering as a self-employed sole trader or partner, you must have your online account activated within 28 days. Then log in with your User ID and password, and then enter your activation code when requested.

FAQs for Minimizing Tax Burden through Self-Assessment Expenses

1. What does Self-assessment entail in taxation?

Self-assessment involves taxpayers accurately computing their tax obligations, fulfilling tax return requirements, remitting self-assessed taxes, and submitting them alongside relevant documents by the stipulated deadline as mandated by tax legislation.

2. What happens when you struggle to meet your tax bill on time?

For individuals facing challenges in meeting tax obligations promptly, HMRC offers the 'Time to Pay' service. This service facilitates the possibility of settling outstanding tax liabilities through instalments, catering to amounts ranging from £32 to £30,000, provided no outstanding tax returns or HMRC debts are outstanding.

3. What happens with late tax payments?

Late tax payments can trigger interest charges from the due date. While the penalty for delayed payment is comparatively lower than for late filing, it's imperative to adhere to filing deadlines. Even if immediate tax bill settlement isn't feasible, timely tax return submission is crucial to avoid penalties. Accurate record-keeping, including meticulous documentation of invoices and receipts, is essential to ensure compliance and facilitate potential tax inspections. Amendments to submitted tax returns are permissible until the subsequent year's deadline.

4. Who can render assistance with self-assessment tax returns?

While self-assessment may seem straightforward for individuals with uncomplicated financial situations, it can be time-intensive. Hiring an accountant can be advantageous for those uncertain about allowable expenses and deductions. Besides saving time, engaging an accountant can mitigate the risk of overpaying taxes or incurring fines due to errors. Moreover, the cost of hiring an accountant is tax-deductible, enhancing its value proposition.

5. Is depreciation an allowable expense for tax purposes?

While depreciation actually isn't deductible for tax purposes, businesses can claim capital allowances, which represent deductions for the effective depreciation of specific assets. However, not all assets qualify for capital allowances, and navigating the associated rules can be complex.

Form your company with Incorpuk today

At Incorpuk, we will help you file accurate information when you register your company through us. We will help you with incorporation articles, a registered office address, and all you may need to register your company in the UK. Contact our team if you seek any information; we will gladly assist.

Final Thoughts

Filing your Self-Assessment tax return correctly is an essential part of managing your finances. However, it can be challenging to keep up with the ever-changing tax laws and requirements. To minimize your tax liability, you should be aware of the Self-Assessment expenses available to claim. Claiming allowable expenses can help reduce your tax bill, but it's vital to keep accurate records of all your expenses to prove their validity.

In this article, we have highlighted the Top 15 Self-Assessment expenses you can claim to reduce your tax bill. However, we recommend seeking professional advice if you're unsure about a specific expense to avoid errors that may result in fines. It's noteworthy that you don't need to send your expense records when submitting your Self-Assessment tax return.

Nonetheless, it's essential to keep them on hand in case HMRC decides to verify them. Lastly, keeping good bookkeeping practices and preparing adequately can help you stay on the right side of HMRC. By following these steps, you can accurately claim your Self-Assessment expenses, stay within the relevant tax laws and regulations, and ultimately minimize your Self-Assessment tax liability.