If you have the chance to reduce the amount of tax you owe, you will obviously jump on it. We took it upon ourselves to make sure that you know the ways you can make those tax relief claims. Let’s break down how to claim tax relief on Self-Assessment form.
Just to give you an idea of where we are headed, there’s ten different expenses you can go for. That’s a lot of claiming!
Managing your own business is a challenging path to take. Add accounting to the mix, and you have got a lot on your plate. Part of being a business owner is reporting to HMRC for requirements and regulations. Most people aspiring to become entrepreneurs tend to overlook the necessity of registering for Self-Assessment. Well, that is why you should be aware of which tax reliefs you can claim.
If you are any one of the following:
- A shareholder
- A self-employed sole trader
- An LLP member
- A limited company director
Then every year you are an under an obligation to send Self-Assessment tax returns to HMRC. Depending on how much you earn, you owe National Insurance and Income Tax contributions.
The profit you made in the last tax year will factor into the amount you need to pay. Do not panic though, the UK Governments know how costly it is to run a business. That is the reason you are allowed to deduct certain business costs from your profit. This, in turn cut downs the amount of tax you must pay through HMRC Self Assessment tax return.
How to Claim Tax Relief on Self-Assessment Form in the UK
It is time to start reducing the long list of expenses. So, here are all the Self-Assessment expenses you are allowed to claim:
1. Office Supplies
Let’s start off with some basics, shall we? Firstly, look at your working area, your desk.
There are plenty of office supplies that you can claim against your tax bill. They include the following:
- Fax machine.
- Postage costs
- Office/work phone.
- Personal mobile phone.
- Company stationery.
- Printing expenses. (Ink and cartridges).
- Computer software that your firm uses for less than two years.
- Computer software that your company uses and makes recurring payments for licence renewal.
If you want to claim further tax relief, you can opt for your computer, tablet, or laptop. Nevertheless, it must be used for business purposes only. Suppose you bought a personal computer in the last tax year. Yet you use it for work half the time. Consequently, you can claim its expense as a business expense. It is calculated on a pro-rate basis.
On the other hand, expensive software and any other heavy items fall under the category of capital allowances. Learn more about how to claim tax relief on Self Assessment form.
2. Charity Donations
Of course, donating to a good cause is reward enough on its own. As a bonus, you can also claim it as an expense.
A person who donates to registered charities can claim 100% tax relief. This applies to community amateur sports clubs (CASCs) as well. Furthermore, the process depends on how you opted to donate funds.
Usually, charitable donations are made through the following ways:
- Your wages or pension through a Payroll Giving scheme.
- Shares, property, or land.
- Your will
- Gift Aid
Because of this tax break, higher rate taxpayers who gave £1,000 to a charity last year might get a refund of £250 on their Self-Assessment form.
Also, the provisions for charitable tax exemption apply to partnerships and sole proprietors. That is not the case for gifts made on behalf of limited businesses.
3. Mileage Expenses
You are in luck if you travel for business. Get your hands on the mileage allowance and reduce the tax you owe.
Whether you drive a van or a car for work, you can get 45p off your tax bill. This applies to every mile you travel, going up to 10,000 miles. Once you reach that threshold, it drops to 25p.
However, it works differently for motorcycles. You can get 24p per mile through simplified expenses at a flat rate. Also, for bicycles you can claim 20p per mile. At least you are getting some exercise. Good for you! Keep reading to find out how to claim tax relief on Self Assessment form.
Aside from the above-mentioned tax reliefs, check these out:
- Hire charges.
- Vehicle licencing fees.
- Vehicle insurance
- Breakdown coverage.
- Air, train, bus costs.
- Hotel room bookings.
- Food expenses for overnight business trips.
Please note that you cannot claim for any personal travel or driving expenses. Technically, this includes any fine you may face while driving to and from home and work. Make sure you fully understand how to claim tax relief on Self Assessment form.
4. Outstanding Invoices
Often, this expense is often overlooked. Yet it is one of the most useful ones you can benefit from as an owner of a business.
HMRC permits you to claim any amount of money included in your turnover that you aren’t expecting to get if you use traditional accounting. The only thing you must do is make sure those invoices are not recoverable from customers ever. This is referred to as a “bad debt”.
You cannot claim the following unpaid debts:
- Not accurately calculated
- Related to the disposal of fixed assets
- Not included in your turnover
It’s also important to keep in mind that if you use cash basis accounting, bad debts cannot be declared in your Self-Assessment form. This is because cash basis accounting only counts income that has been received on your return; you haven’t received payment from your debtors.
6. Marketing Expenditures
HMRC permits you to claim business expenses for marketing costs, including:
- Bulk mail advertising (also known as “mailshots”)
- Any advertising you’ve done in publications (directories, newspapers)
- Costs of website hosting and upkeep.
- Any expenses connected with the creation and distribution of free samples.
As always, there are exceptions to these claims. For example, hospitality costs, entertainment expenses for suppliers of clients.
7. Work Attire
Generally, clothes are a huge expense. Luckily, you can claim some tax relief on certain clothing items, including:
- Clothing you require for safety purposes at work
- Protective clothing needed for your work
- Costumes for any entertainer of actor
The best part is that it does not work like travel expenses. You are free to deduct the total cost of clothes related to your work from your tax bill. Of course, this does not include the clothes you wear every day to the office. Thus, it must be a specific set of clothes, such as a uniform. Now, you know how to claim tax relief on Self Assessment form.
8. Expenses for Hiring Staff
Surely, hiring more staff is a never an easy feat. Getting seasonal or permanent employees on board is a heavy cost to bear. Surely, it’s a good thing that you claim the following expenses against the tax you owe:
- Employer’s National Insurance
- Agency fees
- Business-related training courses
Once again, let’s talk about the exception to the rule. In this scenario, it is the cost of hiring a nanny or babysitter.
9. Certain Subscriptions
Honestly, we tend to ignore the subscribe button, don’t we? Sometimes, though, it can pay off. If you subscribe to trade publications or professional bodies of any sorts, you get to make claims. Of course, that is if they are directly connected to your work.
Additionally, allowable costs cover subscriptions to academic journals. An annual membership of a professional establishment or even a union gets the same treatment.
Expenses such as paying a political party are not part of this category. Also, you cannot claim personal subscriptions charges. Thus, these include entertainment magazine and gym memberships.
To add, do not confuse your charitable donations with subscriptions as they fall under their own category. Discover more about how to claim tax relief on Self Assessment form.
10. Council Tax
Unfortunately, most self-Assessment users often do not recall including council tax when they calculate their business expenses for the tax year.
You can deal with council tax the same way you do with your rent, mortgage interest, or utility bills.
Coincidentally, calculating the amount you are allowed to claim as an expense is done in a similar method. Suppose 20% of your home is used as an office space, you can claim 20% of the cost of council tax.
To summarise, the good news is that there are plenty of Self-Assessment expenses that HMRC accepts as part of your tax return. Even more so if you use simplified expenses. Remember, it is critical that you have proof that said expenses are valid. Hope you now comprehend how to claim tax relief on Self Assessment form.
Henceforth, it is best to maintain records of your business expenses as proof. There is no requirement for you to send these records along with your HMRC Self Assessment tax return. Most likely, no one will ask you to present them. Under a rare circumstance, HMRC might want to investigate your accounts. Therefore, it is ideal to have them ready.