How Do Self-Employed People Claim Tax Deductions on a Self Assessment Tax Return?
If you're self-employed, you'll claim deductions on your Self Assessment tax return. You can deduct a portion of your home bills if you work from home regularly, including heating, electricity, and internet.
Vehicle costs can be claimed using actual expenses or the simpler mileage rate (45p per mile for the first 10,000 miles, then 25p). Phone bills can be partially claimed, based on what percentage is for business use.
Keep receipts for everything! HMRC might ask to see them up to 6 years later, and proper documentation is your best defence in case of an enquiry.
What About Employees? Can They Claim Too?
Yes! Employees can claim tax relief on professional subscriptions needed for their job and working from home costs (£6 per week without needing receipts). Uniform cleaning, using your own car for work duties, and some job-related training are also claimable.
Most employee claims are made through a P87 form or your Self Assessment if you do one. The process is straightforward once you know what you’re entitled to claim. Claiming these deductions can impact an individual's tax code, resulting in automatic adjustments in their pay packets.
I once helped a colleague claim five years’ worth of professional membership fees, resulting in a tax refund of over £600. She hadn’t realised these were tax-deductible until we discussed it over lunch!
Which Tax Deductions Are People Most Likely to Miss?
The Marriage Allowance lets a lower-earning spouse transfer £1,260 of their Personal Allowance to their partner, saving up to £252 a year. Working from home tax relief is often overlooked, even by people who qualify.
Landlords frequently miss deductions for mortgage interest, property repairs, and insurance. Mileage for business journeys adds up quickly but is commonly forgotten about. Home working arrangements can also affect eligibility for private residence relief and capital gains tax, especially when a room is used for both business and personal purposes.
Many self-employed people don’t realise they can claim for things like professional development courses and relevant publications. These smaller items can add up to significant savings over a tax year.
How Do You Keep Records for Tax Deductions?
Use a separate bank account for business transactions to make tracking easier. Take photos of receipts right away, as they often fade over time, making them invalid as evidence. Maintaining accurate records is crucial for tax purposes to ensure all deductions meet the necessary criteria.
Set aside 15 minutes each week to log expenses while they’re fresh in your mind. Keep a simple spreadsheet or use an app to track everything systematically.
For business mileage, note the date, destination, reason for travel, and distance for each trip. This level of detail will satisfy HMRC requirements and make completing your tax return much simpler.
