Sole traders: make sure you're claiming all the expenses you're entitled to

If you're a sole trader, it's vital you take advantage of all the financial help available. Mike Parkes, technical director at GoSimpleTax, runs through some of the most common expenses entrepreneurs aren't claiming for.

It’s true that every penny helps, especially when you are a sole trader, which is why expenses can be the difference between a successful business and a failing one.

There are a number of obvious business expenses that sole traders can claim for ranging from office costs, financial costs, refresher training costs and so on.

But there are also some that some sole traders may not be aware they can claim for.

These include:

• Travel – any business trips you make to meet clients or hotel stays for early morning appointments with stakeholders can be claimed. Fancy a meal in your hotel? That’s also covered as a reasonable expense.
• Clothing – branded uniforms (including protective clothing such as overalls) can be claimed under business expenses.
• Business Premises Costs – these include the utilities needed to maintain your business premises, such as water, electricity, heating and so on.

Again, provided the purchases were solely made for business purposes, you may be able to claim relief.

Being savvy with your expenses in this way can keep your venture alive.

Read: how to raise funding to start your own business

What are other people claiming for?

In 2019, GoSimpleTax gathered research around expenses to provide some insightful statistics. It found, for example, that a collective £962 million worth of expenses was being claimed.

This effectively meant that 60% of people did not file any expenses.

The reasons that were cited? Either that the required receipt had been lost, or they deemed the value too low to bother claiming.

As you can imagine, the most common expenses fall under the ‘vehicle’ and ‘home’ categories – the assumption being that homeworking is becoming progressively more popular among sole traders and small business owners.

Specifically, the more popular claims included:

• Vehicle – fuel costs or, in some cases, entire vehicle purchases are claimable provided it is wholly for the purposes of business development.
• Loans – if you take out financial assistance to support any hiring or development phases, interest on loans can be eased with the help of a business expense claim.
• Office – everything from laptops to energy bills can be covered under business expenses. On phone charges alone, you could claim an estimated £90 from a £450 bill.

While not exhaustive, the above list demonstrates that there is always something to be gained from keeping relevant receipts.

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How do I claim?

You’ll need to log all expenditure, so that when it comes to filing your Self Assessment tax return, the evidence for the claim that they were wholly for business purposes as a sole trader is readily accessible.

Your employees can claim expenses too, but you will need to adopt a strict policy in order to coherently claim and reimburse funds.

With software like GoSimpleTax, sole traders are able to take a picture of their expenditure as it occurs – leaving no excuse for lost receipts.

Once you get into a rhythm of repeatedly logging your purchases, you’ll see how vast the tax relief you can claim becomes.

Then, it’s simply a case of totalling your deductions, detailing the final figure on your return and submitting ahead of the deadline. Software can automatically calculate your total claim amount (and the amount of tax due) before filing your completed Self Assessment tax return direct to HMRC.

Mike Parkes is the technical director of GoSimpleTax, a software that helps you to submit your Self Assessment.