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When you are self-employed you can reduce the amount of income which is subject to tax by subtracting expenses which HMRC have classified as “allowable expenses” by including the total of these in your annual Personal Tax Return. This guide helps to explain which expenses are “allowable” and is based on the guidance provided by HMRC here.

The rule for claiming allowable expenses is that they must be “wholly and exclusively” incurred in the performance of your business.

Therefore if an expense has duality of purpose (i.e. it is used for both personal and business purposes) then these expenses are NOT allowable (e.g. everyday clothing worn at work).  However, where the business and personal usage can be separately and reliably measured then you are able to claim for the business part of these expenses.

Retaining evidence in respect of expenses you have claimed is crucial. HMRC don’t ask you to provide proof of expenses when you submit your tax return each year, but they do occasionally perform spot checks. And they may therefore approach you in the future and ask you to provide evidence to verify the expenses you have claimed. So it’s important you keep all original receipts for any expenses claimed for a period of at least 6 years.

To continue reading, please download the guide using the form below.

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