Getting a handle on what counts (and what doesn't) is a total game-changer. It keeps your tax returns spot on, makes HMRC happy, and most importantly, ensures you're not paying a single penny more in tax than you actually owe.
The main highlights
Boost your profit: By deducting strictly business-related costs from your turnover, you reduce your taxable profit and keep more of your hard-earned cash.
Stay audit-ready: Keep digital or paper copies of every invoice and receipt. It's the simplest way to satisfy HMRC and keep your business records sound.
Automate with digital tools: Use integrated banking and accounting software to track expenses in real-time, making tax compliance effortless and error-free.
Allowable vs. disallowable: The lowdown
Allowable expenses: These are costs that are entirely for your business. Because they lower your taxable profit, you'll end up paying less Income Tax and National Insurance.
Disallowable expenses: These are just your personal costs or things that aren't strictly for work. Since they aren't business-related, you can't deduct them from your profits.
What can you claim?
If you're self-employed, you can usually claim for things like:
Office essentials: Stationery, phone bills, internet and printing.
Travel: Fuel, parking and fares for business trips.
Work clothing: Uniforms, safety gear or costumes.
Staff costs: Salaries, pensions and bonuses.
Legal and financial costs: Things like bank charges, business insurance, interest on loans, and fees for solicitors or accountants.
Marketing: Costs for promoting your business, such as online ads, printed flyers, and website fees.
Stock and merchandise: Raw materials or items you buy specifically to sell.
How can you distinguish expenses?
It’s easy to accidentally mix personal and business spending. This table helps you spot the difference in those tricky "grey area" moments:
Expense type | Allowable | Disallowable |
|---|---|---|
Business | Travel to a temporary site or a hotel stay for a specific client pitch. | Your daily commute to your "fixed" workplace or any parking fines. |
Clothing | Branded uniforms or protective gear you only wear for work. | "Smart" office wear like suits or shoes that you could wear elsewhere. |
Food & entertainment | Business-related meals while traveling overnight for work. | Client entertaining (hospitality) or your everyday "desk lunch". |
Your home | A fair proportion of your heating/lighting for a dedicated workspace. | Your full mortgage payment or DIY projects for personal living areas. |
Legal & financial | Business bank charges, insurance, and professional fees (like an accountant). | Personal legal fees or fines (like speeding or tax penalties). |
Marketing | Online ads, website hosting, and flyers. | Donations to personal causes or ads for non-business projects. |
Stock & merchandise | Raw materials or goods to resell. | Items you bought purely for personal use. |
Working from home? You can still claim
If your home is also your office, you can claim back a portion of your household running costs. You've got two ways to do it:
Choosing between flat rate and actual costs
The simplified flat rate: This is a fixed monthly amount based on your working hours. It's quick, easy, and saves you from hunting down every single utility bill.
Calculating actual costs: This involves working out the exact percentage of your home used for business. For example, if you use one room in a five-room house solely as an office, you could claim 20% of your eligible bills.
What records should you keep?
To keep things audit-ready for HMRC, you'll want to keep these tucked away safely:
Invoices: For every business purchase you make.
Receipts: Digital photos or paper copies - whatever works for you.
Bank statements: To give a clear picture of your business cash flow.
Mileage logs: Essential if you're claiming for travel.
How do I actually claim these expenses?
You claim your allowable expenses when you file your annual Self Assessment tax return. You don’t need to send your receipts or invoices to HMRC with your return, but you do need to keep them safe and accurate throughout the year in case they ever ask to see them. That’s exactly why we emphasise good record-keeping - it makes that final tax return process much faster and gives you total peace of mind.
How to make tracking easy
Let's be honest: spreadsheets can be a bit of a headache and it's easy to lose track. With Making Tax Digital (MTD) now in the mix, keeping digital records isn't just a good idea - it's essential for staying on top of your game.
Feel confident about your taxes
You don't need to juggle multiple subscriptions. When you open a Mettle business account, you get FreeAgent accounting software included at no extra cost.
*To get FreeAgent included, you must make at least one transaction a month from your Mettle account. If you don’t make one transaction a month, or if your Mettle account is closed and you continue to use FreeAgent then the FreeAgent fees will apply. Optional add-ons may be chargeable.
It's a smart, automated solution that works behind the scenes. Just snap a receipt or categorise a payment in the Mettle app, and it syncs straight to your books. FreeAgent is HMRC-recognised and MTD-compliant, so you can track your tax liabilities in real time and submit returns with total peace of mind. Let's take the weight of admin off your shoulders.
Go digital: Say goodbye to paper receipts and hello to digital records.
Keep it separate: Using a dedicated business account makes it much easier to spot what's what.
Ask for help: If you're ever unsure about a claim, a qualified accountant is always better than a best guess.
Is there a better way to stay compliant?
Absolutely. By linking your business account directly to HMRC-recognised software, you can put your admin on autopilot. With Mettle and FreeAgent working together, your records stay synced and up to date without the fuss.
Sound good? Apply now
Mettle is free* and easy to open. Available on iOS and Android.
*Mettle has optional paid-for extras in the app.
