10 Surprising Business Expenses you can claim in 2022

As a sole trader or self-employed tradesperson, 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. But doing that means your business could lose money and profits in the long run.

It can take a bit of effort to figure out which costs count as allowable expenses. But that’s where we come in. We’ve rounded up 10 things you might not know count as a business expense - so you don’t have to.

What are business expenses?

You’ll know that running a business means you’ll incur various costs. So it’s best to keep your receipts safe until it's time complete your Self Assessment. If they count as allowable expenses, they can be deducted from your taxable profits as necessary operational costs*.

How do business expense deductions work?

Even if you have an accountant, it’s a good idea to get an understanding yourself. This way, you'll know exactly what’s going on with your business finances.

Claiming for business expenses is done when you file your Self Assessment*. The IRS requires businesses to keep documentation that proves what you bought, when, and how much you paid*. You’ll need this as evidence if you plan to deduct expenses in your tax return.

Our blog on business tax for tradespeople covers when you'll need to complete your Self Assessment, and what's included.

1. Tax allowance for tools

If you buy tools for your business, you can exclude the cost from the calculation of your earnings as an expense*. But only if the tools aren’t privately used by employees.

If you’re an employee who buys tools for work, you could also think about claiming a tool allowance. If you’re not reimbursed by your employer, you could claim tax relief through your tax code*. You shouldn’t need receipts for this either, but it’s worth noting that your tool provider should be able to give you a statement if needed*.

2. Financial and legal costs

Some financial and legal costs will count as allowable business expenses and qualify for tax deductions. So when filling out your Self Assessment, you could include business costs for things like*:

- 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

Legal fines you’re given for breaking the law can’t be claimed for though*. Like a speeding ticket when travelling to work for example. Also note that you can only claim up to £500 in interest and bank charges if you’re using cash basis accounting*.

3. Unpaid invoices and bad debt

If you’ve ever dealt with a tricky customer, this business expense could relieve some stress in these situations. If you use traditional accounting, you can claim for amounts of 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 through. And you can’t claim them if you use cash basis accounting either. As cash basis only records income on return that you’ve actually received*.

To give you a better picture, here’s some examples you can’t claim for*:

- Debts not included in your turnover.

- Debts related to the disposal of fixed assets, for example land, buildings, and machinery.

- Bad debts that are not properly calculated, for example you can’t estimate that your debts are equal to 5% of your turnover.

4. 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 is taken before your income tax is calculated. So you won’t pay income tax on the amount you donate, but National Insurance will be applied*.

Alternatively, charities and community amateur sports clubs (CASCs) can register with HMRC to be part of the Gift Aid scheme. And this way, they can claim back any tax you’ve paid on your donation.

The charity or CASC will give you a form to sign, along with their HMRC charity reference number.

5. Tax on business phonelines

Paying for your employees to have a home phone can include expenses like; telephone line rental, business-related call charges, and private call charges. But 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 phoneline from your profits as an allowable business expense. You also won’t have to report the phone if it’s part of a salary sacrifice arrangement*.

6. Plant and machinery

When you buy assets for your business, you could claim capital allowances on them*. In most cases, you can deduct the item’s whole value from your profits before paying pax. But it you owned it before it was used in your business, or if it was a gift, you can only take away its market value.

You can claim capital allowances on things like*:

- Business cars and vehicles

- Costs of demolishing plant and machinery

- Parts of a building considered an ‘integral feature’

- Some fixtures, like fitted kitchens or bathroom suites

- Alternations to a building to install another plant and machinery (excluding repairs)

If your annual income is £150k or less as a sole trader or partner, you could use a cash basis system instead which is a bit simpler*.

7. Employee training payments

You could also claim employee training costs as a business expense, as long as the travel, course, or textbooks are solely for work-related training. So if that’s the case, you don’t have to report it to HMRC or pay tax and NI*.

8. Employee clothing

Even though you have to report uniforms to HMRC, you won’t have to pay tax or NI on most of them*. This counts for things like protective clothing your employees need to do their job, and a uniform that they only wear for work.

You can usually claim the whole cost of the clothing to reduce your tax bill*, but it doesn’t include everyday items you choose to wear to work. They’ll have to be essential work-specific items of clothing to class as an allowable business expense.

9. Marketing costs

Another allowable business expense you can claim on your Self Assessment is 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. You can’t claim for what you spend on event hospitality, or entertaining clients, suppliers, and customers.

10. 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.

Although, paying for subscriptions to political parties or gym memberships won’t qualify for this allowance*. And it’s worth mentioning that charitable donations you make on a subscriber-level can’t be claimed this way either. They’ll still have to go through the schemes we listed before.

*Information taken from Gov.UK, correct as of September 2022.

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