As a self-employed chair, space or room renter you must file your own tax returns. You are entitled to claim a range of ‘allowable expenses’ to help reduce your tax bill – so make sure you’re not paying too much.
This blog post covers:
- Allowable expenses for the self-employed
- Allowable expenses: office costs
- Allowable expenses: travel costs
- Allowable expenses: clothing
- Allowable expenses: things you buy to sell on
- Allowable expenses: legal and financial costs
- Allowable expenses: advertising and marketing
- Allowable expenses: your NHF/NBF membership fee
- Allowable expenses: staff costs
- Using something for private and business use
- Keeping receipts and proof of your outgoings
- Using an accountant or bookkeeper
You’ll pay tax on your ‘taxable profit’. You can reduce your taxable profit by deducting some of the costs of running your self-employed business. This means you’ll pay less tax.
For example, if your turnover is £30,000 and you claim £7,000 in allowable expenses, you will only pay tax on the remaining £23,000 which is known as your taxable profit.
Allowable expenses include:
• Office costs.
• Travel costs.
• Things you buy to sell on.
• Legal and financial costs.
• Advertising and marketing.
• Your NHF/NBF Member fee.
• Staff costs.
See more on each of these below (this list of allowable expenses is not comprehensive).
These guidelines will apply to you if you do your Self Assessment tax returns on a ‘cash basis’. This means you only pay tax on money you actually receive during your accounting year. You can use cash basis if you are self-employed and have a turnover of £150,000 or less a year.
Allowable expenses include:
• Rent, rates, utility and insurance costs.
• Equipment and repairs.
• Landline, mobile, fax and Internet bills.
• Postage, printing, ink and cartridges.
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NHF/NBF Members have access to a free 24/7 commercial helpline for advice on all aspects of tax and VAT. As a Member you’ll also benefit from free legal insurance to help cover the costs of HMRC tax enquiries and disputes. Find out more about this amazing benefit for Members:
You can claim travel and hotel costs for business-related trips, for example, training, exhibitions or other industry-related events.
You cannot claim for travel between home or work or any fines you incur such as speeding fines.
You can claim allowable expenses for any uniform or protective clothing you wear for work. You cannot claim for everyday clothing, even if you wear it for work.
Stock you buy in to sell as retail products can be claimed as an allowable expense.
Allowable expenses can be claimed for the following business-related outgoings:
• Accountancy and legal fees.
• Bank, overdraft and credit card charges.
• Interest on loans and hire purchase.
• Lease payments.
(You can claim up to £500 in interest and bank charges.)
You can claim allowable expenses for:
• Advertising, for example, in newspapers and magazines.
• Website costs.
Entertaining clients and event hospitality cannot be claimed as an allowable expense.
The cost of your NHF/NBF membership fee is an allowance expense.
Any subscription to a trade body or professional organisation related to your business is an allowable expense.
Subscriptions to industry-related magazines and journals are also an allowable expense.
Our comprehensive guide to the financial aspects of running a small business is available free to NHF/NBF Members.
As a self-employed person you can employ someone or use a sub-contractor. If you do, you can claim the following allowable expenses:
• Salaries and bonuses.
• Pensions and benefits.
• Agency fees.
• Sub-contractor fees.
• Employer’s National Insurance.
You cannot claim for carers or domestic help, for example, childminders.
You can only claim allowable expenses for business costs.
For example, you may use your mobile phone for both private and business use. But you can only claim allowable expenses for the phone calls and texts you make in relation to your business.
All the allowable expenses you claim must relate to your self-employed hair, barbering or beauty business.
Always get receipts for all your allowable expenses and keep them well-organised and in a safe place. Remember that HMRC may ask to see proof of the allowable expenses you are claiming.
Find out how to get more help with your self-employed tax returns on the GOV.UK website.
Using a qualified accountant or bookkeeper to help with your business accounts and tax returns could save you a lot of time and thousands of pounds in the long-run. Try to choose an accountant who is familiar with the hair and beauty industry.
• Self-employed chair/space/room renters can claim allowable expenses to pay less tax.
• Allowable expenses can be claimed on a wide range of business outgoings, from office and travel costs to legal, financial and advertising fees.
• NHF/NBF membership fees are an allowable expense.
• Be careful when claiming for items used for both business and personal use – claim only for the business use portion.
• Get receipts or other proof of all your business outgoings and keep them safe – the HMRC may ask to see them.
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