One of the most important aspects of being self employed is knowing how to correctly file your taxes. But self-assessment can also be one of the most confusing and worrying aspects of self-employment. You want to ensure that you are claiming any expenses possible, but incorrect filings can lead to big fines.
In order to legally claim something as an expense, it has to be used for business purposes. But for people who are self-employed, this line can often be blurred. Most self-employed people will use the same car and phone for personal and business purposes, for example, leading many to worry about how much to claim back.
Ensuring that you pay what you owe and claim back what you can is instrumental in helping you to succeed in self-employment, so below is a list of some key business expenses you can claim back.
Let’s begin with one of the most common expenses: travel. Although this is often a major concern for self-employed people who use the same car for business and personal use, it will come as a relief that the rules are actually quite straightforward. You are entitled to claim a percentage of all maintenance and running costs, such as fuel, repairs, insurance, and NCT. However, you must calculate what percentage of the vehicles use is for business, and keep receipts in case you need to prove how you arrived at this figure. It should be noted that travel between home and a place of work is usually not a deductible expense.
Similarly, any travel expenses for business trips, such as train tickets, flights, or hotels, can be legitimately claimed as business expenses. Again, you should keep documentation to prove that a trip’s primary purpose was for business if need be.
Rent & Utility Bills
If you work in some sort of shared office space, the cost of this can be claimed back as an expense. But many of the people working in self-employment do so from home, which can be confusing. The good news is that you can claim a percentage of bills such as electricity, gas, phone, and broadband.
Like motoring expenses, you need to be realistic about what proportion is used for business. For example, there are 168 hours in a week, so if you work 40 hours online, you can claim back 24% of your broadband charges. Alternatively, if the space used for business is 10% of the total square footage of your home, you could claim 10% of your rent or heating as a business expense.
Marketing is critical to the success of any business, but it is particularly important for the self-employed. It should come as a relief to many then that these costs can be claimed back as expenses. Any promotional material that appears online or in print can be deducted, but please note that entertainment costs, regardless of whether they are for staff or customers, cannot.
If you are self-employed, you are likely to build up some consultancy fees for expert services, such as legal or financial advice. As long as the advice sought is related directly to the operation of your business, these can all be claimed as an allowable expense.
Similarly, you can claim for any expenses that go towards employing other people, although you cannot claim back your own wage or any owner’s draws. But any salaries, bonuses, recruitment costs, or insurance contributions can be claimed back.
They may not appear to be the biggest expense, but financial charges can add up over time, so you want to make sure you’re not missing out on any allowable expenses. Any fees, whether they are for maintenance, currency conversion, overdrafts, and so on, can be claimed back against your taxable income.
Interest on Loans
In addition to being able to claim back fees and charges from financial institutions, you can also claim back the interest on any business loans you may have taken out. However, it is crucial to note that this only applies to the interest on the loan, and not to the repayments of the loan.
Any lease payments for vehicles or machinery directly related to business operations can be claimed back. If the vehicle/machine is also also used for personal use, then only the business portion can be claimed back. There are also different limits depending on the CO2 emissions of a vehicle which will affect how much can be claimed. For more information on this, please see this document by the Revenue Commission.
If you purchase a new piece of equipment for your business, such as a laptop, this is considered a business asset. This means it is not listed as an expense, as not only is the equipment intended to bring in more profit, but it can also be sold at a later date. However, as the value of the item will go down over time, you can claim back the cost of the asset as an expense.
It is important to note that you are not claiming back the depreciation, which is not an allowable deduction under Irish law. Instead, we allow the cost of assets that meet these criteria to be claimed back at a rate of 12.5% over 8 years. In simple terms, this means you can claim back 12.5% of the original cost of an asset per year, regardless of depreciation.
Making the move from a standard 9-5 job to self-employment is a big leap. It carries with it plenty of stress and worries, and will often be an uphill struggle. That means it is all the more important to make sure you are filing your taxes correctly. It is not a simple process, but all these claims add up over time, saving you money, and making it a lot more likely that you will succeed in your endeavours.