When you work for yourself, you pay tax on your profit: what the business earned, less its allowable expenses. An allowable expense is a cost of running the business. Gov.uk is plain about the limit: allowable expenses do not include money taken from your business for personal use.
The expense boxes on the tax return
The self-employment pages of a Self Assessment return (SA103F) ask for your expenses in these groups. Every PencePal account starts with one category for each, so a doc’s totals by category line up with the boxes.
| Box | Category in PencePal |
|---|---|
| 17 | Goods for resale and materials |
| 18 | Subcontractor payments |
| 19 | Wages and staff costs |
| 20 | Car, van and travel |
| 21 | Rent, rates, power and insurance |
| 22 | Repairs and maintenance |
| 23 | Phone, stationery and office costs |
| 24 | Advertising and entertainment |
| 25 | Interest on loans |
| 26 | Bank and finance charges |
| 27 | Irrecoverable debts |
| 28 | Accountancy, legal and professional fees |
| 30 | Other business expenses |
Box 29, depreciation and loss or profit on the sale of assets, is not an allowable expense: equipment is claimed through capital allowances instead. If your turnover was below £90,000, the form lets you put your total expenses in one box rather than splitting them.
What you usually cannot claim
- Money taken from the business for personal use.
- Travel between home and work, non-business driving, and fines or penalty charges.
- Everyday clothing, even if you wear it for work. Uniforms, protective clothing and costumes can be claimed.
- Entertaining clients, suppliers or customers, such as hospitality at events or business lunches.
The trading allowance
Instead of claiming expenses, you can use the £1,000 tax-free trading allowance. You cannot do both: if you claim the allowance, you cannot deduct any other expenses.
Keeping it tidy
File each expense under its category as you add it, and the totals for your return are ready when you need them. The PencePal expense tracker starts with these categories, and you can rename them or add your own.