Costs you can reclaim on the business
Price Mann • June 16, 2021
Costs you can reclaim on the business
DownloadAllowable expenses and allowances in 2021/22
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If you’re self-employed, your business will rack up various running costs throughout 2021/22. Some of those you’re able to deduct as allowable expenses.
By deducting these allowable expenses as part of calculating your business’s taxable profits, it’s possible for us to reduce your income tax bill in the process.
For example, if your business has turnover of £50,000 in 2021/22, and you have £15,000 in allowable expenses, your taxable profit will be £35,000. This is what you will pay tax on.
Money you take from your business to pay for private purchases, however, does not count as an allowable expense and cannot be deducted against your business’s profit.
Allowable expenses are available to sole traders and business partners who are registered as self-employed. At the most recent count in April 2021, the UK’s self-employed population stood at around 4.16 million.
With an increasing number of the UK population getting COVID-19 vaccines and life slowly returning to normal, what can you claim in allowable expenses in 2021/22?
Office expenses
It’s possible to claim allowable expenses for items you usually use within your business for less than two years. Items include things like stationery, rents, rates, power bills, and insurance.
Business and water rates fall into this category, as do utility bills, business insurance, security, commercial rent, and maintenance or repairs. Buying or building a business premises isn't classed as an allowable revenue expense.
The costs involved with buying, installing or replacing plant or machinery equipment you keep to use in your business are normally eligible for capital allowances, unless you use cash-basis accounting.
If you use cash-basis accounting, such costs should be claimed as an allowable expense instead, unless you have purchased a car, where you should claim capital allowances.
For businesses in the hospitality and leisure sectors that use premises, the business rates holiday expires at the end of this month. From 1 July 2021 until 31 March 2022, business rates will be charged at a reduced 34%. You will be able to claim this as an allowable expense in 2021/22.
Travel expenses
With the UK in the grip of three COVID-19 lockdowns during 2020/21, and regional restrictions in between, it’s likely claims for travel expenses will be subdued when 2020/21 tax returns are filed on or before 31 January 2022.
As the economy gradually reopens in 2021/22, however, it stands to reason that a spike in claims for travel expenses is pretty likely over the course of the tax year.
Costs relating to cars, vans and travel expenses are all allowable, unless they’re not related to the business, for example your commute to work or when you’ve been fined, perhaps for a speeding or parking misdemeanour.
That encompasses quite a wide scale of travel-related business expenses you could claim, including vehicle insurance, repairs or services, hotel rooms, and arguably the biggest one of all, fuel.
As long as you keep receipts or other proofs of purchase, you can claim back these allowable expenses before we calculate your taxable profit.
Staff costs
Small and medium-sized employers account for around 60% of employment in the UK’s private sector.
For those who are self-employed and employ staff, you can claim salary and benefits as an expense. It’s possible to claim on employees' wages and redundancy payments, as well as employer's National Insurance contributions (NICs).
You can also claim insurance and pension benefits for employees, along with any employee childcare provision you make, and training costs.
It’s not possible to claim your own wages, salary or other money drawn from the business, nor your own NICs, income tax, pension costs or life insurance.
Home-working
Working from home has become the norm over the last year, for both the self-employed and employees. Previously limited to a handful of freelancers or contractors, the COVID-19 pandemic saw 47% of the UK’s 32 million employees follow suit. Separate allowances apply to home-working employees.
The good news is the self-employed can claim a proportion of the costs of their household bills for things like lighting, heating, cleaning and insurance.
Mortgage interest – which used to be of particular interest to self-employed landlords until recently, council tax, water rates, and general maintenance can also be included.
The bad news is you can’t include all of your bills.
The figures you submit should be based upon a percentage of your actual household bills. To arrive at these figures, you should use a reasonable method, such as using the floor area or number of rooms used for business, and the amount of time the space is used for work.
If you intend to become self-employed in 2021/22 and work from home, you might need to change your home insurance to reflect that. You can reclaim that as an allowable expense. Also, if you end up working from home for 25 hours or more each month, you might be able to use HMRC's simplified expenses system instead. We can talk you through that.
Residential landlords
An increasing number of residential landlords have incorporated their businesses since April 2017, when valuable finance cost relief began to be tapered.
For those who continue to operate as a sole trader or in a business partnership, finance cost relief on residential properties is restricted to the basic rate of income tax (20%) in 2021/22. You can, however, continue to deduct many of the expenses you incur when letting out residential properties.
On top of the expenses already mentioned, examples of allowable expenses include landlord insurance, letting agents’ fees, and the costs involved with paying cleaners or gardeners.
You can also reclaim what we charge you for our services, not that we charge the earth, plus any legal fees for lets of a year or less, or for renewing a lease of less than 50 years.
Allowances for landlords
In some circumstances, residential landlords might be eligible for the annual investment allowance and replacement of domestic items relief.
The annual investment allowance is worth £1m in same-year tax relief until 1 January 2022, at which point the amount available will revert back to £200,000. This applies to capital investments in plant and machinery assets.
Domestic items relief replaced the old wear-and-tear allowance back in April 2016. This only applies to items you’re replacing, such as beds, carpets, crockery or cutlery, curtains, white goods, or sofas.
It’s not possible to claim tax relief on the actual cost of kitting out a property with furniture or appliances for the first time. It can only apply when an item is genuinely replaced and no longer used in the property.
Start your 2020/21 tax return
With COVID-19 likely to subdue the amount of allowable expense claims in 2020/21 tax returns, there’s no time like the present to get started on yours.
It’s more pressing if you submit a paper return, with a midnight deadline on 31 October 2021. For digital returns, the deadline is midnight on 31 January 2022.
There’s no reason why you can’t get ahead of the game and file your return. Share your 2020/21 records with us and we can take it from there.
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Managing risk in your investment portfolio Tips for a balanced investment approach. Investment markets rise and fall, yet the goals that matter to you – retirement security, children’s education, a comfortable buffer against the unexpected – remain constant. Managing risk means giving each goal the best chance of success while avoiding avoidable shocks. You can do that by holding the right mix of assets for your timeframe, using tax wrappers efficiently, and controlling costs and emotions. The 2025/26 UK tax year brings unchanged ISA and pension allowances. This guide explains the key steps, such as diversifying sensibly, rebalancing with discipline, safeguarding cash, and monitoring allowances, so you can stay on track whatever the markets deliver. It is an information resource, not personal advice. Start with a clear plan Define goals and timeframes: Decide what each pot of money is for (for example: house deposit in three years, retirement in 20 years). Time horizon drives how much short-term volatility you can accept. Short-term goals usually need more cash and high-quality bonds; long-term goals can justify more equities. Set your risk level in advance: Ask yourself two questions. Risk capacity: How much loss could you absorb without derailing plans (linked to your time horizon, job security and other assets)? Risk tolerance: How do you feel about market swings? Use a more cautious mix if you are likely to sell in a downturn. Ring-fence cash needs: Keep 3-6 months’ essential spending in easy-access cash before you invest. This reduces the chance of selling investments at a low point to meet bills. Choose simple, diversified building blocks: Broad index funds and exchange-traded funds (ETFs) covering global equities and high-quality bonds provide instant diversification at low cost. Avoid concentration in a single share, sector or theme unless you are comfortable with higher risk. Diversification: Spread risk across assets, regions and issuers Diversification reduces the impact of any single holding. Practical ways to diversify include the following. Assets: Use both growth assets (equities) and defensive assets (investment-grade bonds, some cash). Regions: Combine UK and global holdings. Many UK investors hold too much domestically; global funds spread company and currency risk. Issuers: In bonds, mix UK gilts and investment-grade corporate bonds to diversify credit exposure. Currencies: Equity funds are commonly unhedged (currency moves add volatility but can offset local shocks). For bonds, many investors prefer sterling-hedged funds to lower currency risk. A diversified core helps the portfolio behave more predictably across different market conditions. You can add small “satellite” positions if you wish, but keep any higher-risk ideas to a modest percentage of the whole. Use tax wrappers to reduce avoidable tax and trading frictions Efficient use of ISAs and pensions is one of the most effective risk-management tools because it protects more of your return from tax. ISAs (individual savings accounts) Annual ISA allowance: £20,000 for 2025/26. You can split this across cash, stocks & shares and innovative finance ISAs. Lifetime ISAs (LISAs) are capped at £4,000 within the overall £20,000. Junior ISA (for children under 18): £9,000 for 2025/26 (unchanged). ISAs shield interest, dividends and capital gains from tax. Rebalancing inside an ISA does not create capital gains tax (CGT), which helps you maintain your chosen risk level at lower cost. Note: There has been public discussion about potential ISA reforms, but the current 2025/26 allowance is £20,000. If government policy changes later, we will let you know. Pensions (workplace pension, personal pension/SIPP) Annual allowance: £60,000 for 2025/26 (subject to tapering for higher incomes; see below). You may be able to carry forward unused annual allowance from the three previous years if eligible. Tapered annual allowance: If your adjusted income exceeds £260,000 and threshold income exceeds £200,000, the annual allowance tapers down (to a minimum of £10,000 for 2025/26). Money purchase annual allowance (MPAA): £10,000 for 2025/26 once you’ve flexibly accessed defined contribution benefits (for example, taking taxable drawdown income). Tax-free lump sum limits: The lifetime allowance has been replaced. From 6 April 2024, the lump sum allowance (LSA) caps total tax-free pension lump sums at £268,275 for most people, and the lump sum and death benefit allowance (LSDBA) is £1,073,100. Pensions are long-term wrappers designed for retirement. Contributions usually attract tax relief and investments grow free of UK income tax and capital gains tax while inside the pension. Personal savings: Interest allowances Personal savings allowance (PSA): Basic-rate taxpayers can earn up to £1,000 of bank/building society interest tax free; higher-rate taxpayers up to £500; additional-rate taxpayers do not receive a PSA. Starting rate for savings: Up to £5,000 of interest may be taxable at 0% if your other taxable non-savings income is below a set threshold. For 2025/26, that threshold is £17,570 (personal allowance of £12,570 plus the £5,000 starting rate band). Dividends and capital gains outside ISAs/pensions Dividend allowance: £500 for 2025/26 (unchanged from 2024/25). Dividend tax rates remain 8.75%, 33.75% and 39.35% for basic, higher and additional-rate bands, respectively. The annual capital gains tax (CGT) exempt amount , £3,000 for individuals (£1,500 for most trusts). CGT rates from 6 April 2025: For individuals, 18% within the basic-rate band and 24% above it, on gains from both residential property and other chargeable assets (carried interest has its rate). HMRC examples confirm the £37,700 basic-rate band figure used in CGT calculations for 2025/26. CGT reporting reminder: UK residents disposing of UK residential property with CGT to pay must report and pay within 60 days of completion. Other gains are reported via self assessment (online filing deadline is 31 January following the tax year; if you want HMRC to collect through your PAYE code, file online by 30 December; payments on account remain due 31 January and 31 July). Why this matters for risk: Using ISAs and pensions lowers the drag from tax, allowing you to rebalance and compound returns more effectively. Outside wrappers, plan disposals to use the £3,000 CGT allowance and each holder’s tax bands and consider transfer to a spouse/civil partner (no CGT on gifts between spouses) before selling where suitable. Bonds and cash: Interest-rate and inflation considerations Interest rates: The Bank of England reduced the Bank Rate to 4% at its August 2025 meeting. Bond prices can move meaningfully when rates are high or changing, especially for longer-dated bonds. Consider the duration of bond funds and whether a mix of short- and intermediate-duration exposure suits your time horizon. Inflation: Headline Consumer Price Index (CPI) inflation was 3.6% in the 12 months to June 2025, while the CPI including owner occupiers’ housing costs (CPIH) rose by 4.1%. Inflation affects the real value of cash and bond coupons, and can influence central bank policy, affecting bond prices. Review whether your mix of cash, index-linked gilts and conventional bonds remains appropriate as inflation and interest-rate expectations evolve. Cash strategy: For short-term needs, spread deposits to respect Financial Services Compensation Scheme (FSCS) limits. For longer-term goals, excessive cash can increase the risk of falling behind inflation. Control costs and product risk Keep fees low: Ongoing charges figures (OCFs), platform fees and trading costs compound over time. Favour straightforward funds and avoid unnecessary expenses. Understand the product: Structured products, highly concentrated thematic funds or complex alternatives can behave unpredictably. If you use them, size them modestly within a diversified core. Use disciplined trading rules: Avoid frequent tinkering. Set rebalancing points (see below) and resist acting on short-term news. Rebalancing: Why, when and how Markets move at different speeds. Without rebalancing, a portfolio can “drift” to a higher or lower risk level than you intended. Follow this simple rebalancing framework. Invest in something that will rebalance automatically (i.e. certain ETFs) Frequency: Review at least annually. Thresholds: Rebalance when an asset class is 5 percentage points away from target (absolute) or 20% away (relative). Tax-aware execution: I prefer to rebalance inside ISAs and pensions. Outside wrappers, use new cash or dividends where possible; then consider selling gains up to the £3,000 CGT allowance and factoring in dividend and savings allowances. Implementation tip: If markets are volatile, use staged trades (for example, three equal tranches a few days apart) rather than one large order. Safeguard cash and investments with the right protections FSCS protection (cash deposits): Up to £85,000 per person, per authorised bank/building society group is protected. Temporary high balances from specific life events can be covered up to £1m for six months. The Prudential Regulation Authority has consulted on raising the standard deposit limit to £110,000 and the temporary high balance limit to £1.4m from 1 December 2025 (proposal stage at the time of writing). FSCS protection (investments): If a regulated investment firm fails and your assets are missing or there is a valid claim for bad advice/arranging, compensation may be available up to £85,000 per person, per firm. This does not protect you against normal market falls. Operational risk checks: Use Financial Conduct Authority authorised providers, check how your assets are held (client money and custody), enable multi-factor authentication, and keep beneficiary and contact details up to date. Currency risk: When to hedge For equities, many long-term investors accept currency fluctuations as part of the growth engine, since sterling often weakens when global equities are stressed, partly offsetting losses. For bonds, many prefer sterling-hedged funds to keep defensive holdings aligned with sterling cashflow needs. A blended approach works: unhedged global equities plus mostly hedged bonds. Behavioural risks: Keep decisions steady Common pitfalls include chasing recent winners, selling after falls or holding too much cash after a downturn. Tactics to keep you on track include: automate contributions (regular monthly investing), which spreads entry points write down rules (what you will do if markets fall 10%, 20%, 30%) separate spending cash from investments so you do not sell at weak prices to fund short-term needs use portfolio “buckets” in retirement. Retirement planning: Sequence-of-returns risk and withdrawals If you are drawing an income from investments consider the following. Hold a cash buffer (for example, 12–24 months of planned withdrawals) to avoid forced sales during sharp market falls. Be flexible with withdrawals: Pausing inflation-indexing or trimming withdrawals after a poor market year can help portfolios last longer. Use tax bands efficiently: Consider the order of withdrawals (pension, ISA, general investment account) to make use of personal allowance, PSA, dividend allowance and the CGT annual exempt amount. Take care around the MPAA if you are still contributing to pensions after accessing them. Putting it together: A repeatable checklist Confirm goals and time horizons. Check emergency cash (3-6 months). Map your target asset allocation. Use wrappers first: Fill ISAs and workplace/personal pensions as appropriate. Keep costs low: Prefer broad index funds/ETFs. Set rebalancing rules: Annual review + thresholds. Document tax items: Monitor dividend/CGT use; note 60-day property CGT rule; plan for 31 January/31 July self assessment dates if relevant. Review protection limits: Spread larger cash balances across institutions in line with FSCS; note proposed changes for late 2025. Schedule an annual review to update assumptions for interest rates, inflation and any rule changes. Get in touch if: you are unsure how to set or maintain an asset allocation you plan to draw income and want to coordinate wrappers and tax bands you expect large one-off gains or dividends and want to plan disposals or contributions you have concentrated positions (employer shares, single funds) and want to reduce single-asset risk tax-efficiently you are considering more complex investments. Wrapping up Risk management is not a one-off task but an ongoing discipline. By defining clear objectives, spreading investments across regions and asset classes, using ISAs and pensions to shelter returns, and reviewing allocations at least annually, you create a framework that limits surprises and keeps decisions rational. Document key dates – self assessment payments on 31 January and 31 July, the 60-day CGT rule for property, and the annual ISA reset on 6 April – so tax never forces a sale at the wrong time. Check deposit limits and platform safeguards for peace of mind, and keep a written record of your rebalancing rules to prevent knee-jerk trades. If life events or regulations change, revisit your plan promptly. A measured, systematic approach lets your portfolio work harder while you stay focused on the goals that matter most. Important information This guide is information only and does not account for your personal circumstances. Past performance is not a guide to future returns. The value of investments and income from them can fall as well as rise, and you may get back less than you invest. Tax rules can change and benefits depend on individual circumstances. If you need personalised advice, please contact a regulated financial adviser. If you’d like advice on managing your portfolio, get in touch.
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