What expense claims are allowed for tax ?
This is a guide to the expense claims which Self Employed medical and healthcare practitioners can claim against tax.
This webpage relates to Self Employed people only
Examples of expense claims for Self Employed medical and healthcare professionals which are allowed to be claimed against tax:
- Products for resale.
- Clinic consumables.
- Business premises including business rates, rent, electricity and gas (also for your home – see below).
- Travel and subsistence for non-routine journeys (see below).
- Office expenses including stationery, postage and computing consumables.
- Marketing expenses including advertising, brochures, business cards.
- Staff costs, including salaries & wages, employer’s National Insurance, clothing which is clearly branded for the business, health and safety clothing.
- Professional fees.
Expense Claims for Self Employed Medical and Healthcare Professionals
A critical distinction between expense claims for Self Employed people and Limited Companies is ‘apportionment’. Self Employed people can apportion some expenses between business and private, but this is not permitted for limited companies.
This means that, for some expenses, Self Employed people can a claim a business percentage of the total cost. Examples of this are use of home, mobile phone contracts and computers. A reasonable estimate of the business/private percentage is usually acceptable.
Also please note, if you are Self Employed, you are not an employee of the business.
People who are Self Employed can claim expenses which are “wholly and exclusively” incurred in the course of the business.
It is a surprise to many that certain expense claims are very limited and restricted
As a Self Employed person, your ‘business’ journeys which are “regular and predicatable” are not allowed as a tax claim. Only ad hoc (non-routine) journeys can be claimed for against tax.
For example, if a practitioner has a clinic, the journey from home to the clinic is not a tax-allowable expense, it is categorised as a private journey. However, journeys from home or the clinic to visit clients in their home, and which are varying in nature to different clients, are a tax-allowable expense.
This applies to all means of transport, including vans, cars, trains and buses.
Cars and Vans
The same rule applies as for Travel (above) that ‘regular and predictable’ journeys are private and not business.
The simplest method for a Self Employed person is to claim for business journeys using the flat mileage rate of 45p per mile for the first 10,000 miles, then 25p after that. A further 5p per mile can be added for a passenger.
The flat rate covers all vehicle costs including fuel, repairs, insurance, and the purchase price of the vehicle. No other vehicle-related costs can be claimed, although parking fees and tolls can be claimed separately.
A record of all business journeys should be kept, including date, mileage and purpose of journey.
The more complicated method is to use the business/private apportionment option. The purchase price of the vehicle is claimed using Capital Allowances (see below) and using the business percentage. Then all the running costs must be listed and receipts kept, and then the business percentage is claimed as a proportion.
It is not permitted to switch between these options for the same vehicle.
Meals cannot be claimed by Self Employed people who go to the same place every day. HMRC take the view that people have to eat anyway.
If you are ‘on the move’ and in a different place every day, then you may claim for your lunch bought out.
GOV UK Link: “travel and subsistence: expenditure on meals and accommodation”
Overnight subsistence and accommodation expenses
If a business trip by a Self Employed person necessitates one or more nights away from home, the hotel accommodation and reasonable costs of overnight subsistence are deductible. There are no fixed allowable amounts.
Use Of Home
There two options to claim a Use of Home expense:
The first option is to use the appropriate flat rate allowed by HMRC:
GOV UK link: working from home
The second option is to measure the space in your home that is used for the business, as a proportion of the home, exluding kitchen and bathroom(s). Then use that proportion against utility bills. Home rent payments can also be apportioned, but it is recommended that mortgage payments are not included because this can cause complications with Capital Gains Tax when the home is sold.
For Self Employed people, the claiming of training expenses is restricted, and not as generous as for employees of Limited Companies.
Training costs for a new skill are not claimable.
Only training costs for the development and maintenance of an existing skill can be claimed against tax.
Most people in business have a mobile phone used for business and private use.
A reasonable estimated percentage of the business/private use is usually acceptable.
Examples of Expenses not allowed as a tax deduction for Self Employed/Sole Traders:
• Fines and penalties
• Entertaining (ie. hospitality for customers, suppliers and others)
• Private meals
• Mileage to and from a regular “place of business”
• Unbranded clothing
• Class 4 and Class 2 National Insurance contributions
Capital Items / Fixed Assets
Major expenses items, typically over £500, eg. equipment, computers, vehicles, are classed as “Capital Expenditure” for tax purposes.
They are allowed for taxation as Capital Allowances which is a different system than expenses. The Capital Allowances system changes from year to year, but frequently a business with relatively low value capital purchases, eg. a personal computer, will be able to claim the full cost in the year of purchase.
If you choose the new Cash Basis then many Capital purchases will be allowed as an expense in the year of purchase.
The principle of a reasonable estimated percentage use of business/private also applies to capital purchases, eg. computers and mobile phones.