Claiming business expenses: a guide for the self-employed

The self employed can claim relief from tax on certain expenses incurred during the course of business. Geoff Everett and Liz Richardson of accountancy and investment management group Smith & Williamson explain what qualifies under the strict rules.

You can only claim the entire cost of a business expense if it is incurred ‘wholly and exclusively for the purpose of the trade’ and also if the expense is of a ‘revenue’ nature, as opposed to a ‘capital’ purchase, such as a computer.

However, if expenditure is for both private and business use, you cannot claim a deduction unless you can separate the business element.  For example, a suit to wear for business purposes would be seen as having a dual purpose, even if you only use it at work.  As a result, you could not charge it as a business expense.  However, where motor expenses are incurred in travelling to a client whilst also visiting friends, the business element of this journey can be identified and deducted.

Examples of typical expenditure and deductibility

The following lists some of the more common expenses and suggests which can be claimed as a business cost.

Acquisition of capital items

When you acquire capital items, such as a computer, you generally can’t claim an outright expense but instead can claim tax relief via the capital allowances system.