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Allowable and disallowable expenses explained

by Intuit•23• Updated 1 year ago

Discover the difference between allowable and disallowable expenses. We'll also talk about the common expenses you can claim on your income tax and how they appear on the Self Assessment tax return (SA103F).

What are allowable expenses?

Allowable expenses are costs that are essential and directly related to running your business. These expanses can be deducted from your taxable income, reducing your overall Income Tax liability.

Allowable expenses do not include money taken from your business to pay for personal purchases.

What are disallowable expenses?

On the other hand, disallowable expenses are costs that are not considered necessary or solely for business purposes. These expenses cannot be deducted from your taxable income.

For more information, read the HMRC guide.

Allowable expenses for Self Assessment tax return (SA103F)

Here's a breakdown of the deduction categories you can claim as allowable expenses on your Self Assessment tax return. It includes the SA103F box numbers, QuickBooks account detail types, and information about what expenses you can deduct and what you can't.

Box 17 - Cost of goods bought for resale or goods used

QuickBooks account detail type	Allowable expenses	Disallowable expenses
• Cost of Sales - COS • Supplies and materials - COS • Shipping, freight and delivery - COS • Other costs of service - COS • Equipment rental - COS	Raw materials, direct costs of producing goods sold, opening/closing stock adjustments, commissions, and discounts. It can also include fuel costs but only for taxi, minicab, or haulage drivers.	Cost of goods/materials for private use, equipment depreciation.

Box 18 - Construction industry (payments to subcontractors)

QuickBooks account detail type	Allowable expenses	Disallowable expenses
Withholding Tax Purchase (CIS)	Payments to subcontractors in the construction industry (before deductions). It can include work in a domestic environment, such as painting or decorating.	Not applicable to this category.

Box 19 - Wages, salaries and other staff costs

QuickBooks account detail type	Allowable expenses	Disallowable expenses
• Cost of Labour - COS • Payroll Expenses • Cost of Labour	Others to whom you pay salaries, wages, bonuses, pensions, benefits or other staff costs, including agency fees, subcontract labour costs, and employer's NICs.	Your own wages and drawings, pension payments, NICs, or any payments made for non-business work.

Tip: Remember to keep a record of any money you take for your own personal use from your business cash, business bank account, or personal bank account if you don't have a separate business account.

Box 20 - Car, van and travel expenses

QuickBooks account detail type	Allowable expenses	Disallowable expenses
Travel Auto	Expenses for car/van insurance, repairs, servicing, fuel, parking, hire charges, vehicle license fees, AA/RAC membership, train/bus/air/taxi fares, and hotel/meal costs on overnight business trips.	Not applicable to this category.

Tip: You should list insurance for your vehicle under auto expenses, not insurance.

Box 21 - Rent, rates, power and insurance costs

QuickBooks account detail type	Allowable expenses	Disallowable expenses
• Rent • Utilities • Insurance	Rent for business premises; business and water rates; light, heat, power costs; property insurance; security; and use of home as office (business portion only).	Private or non-business portions of these expenses; cost of buying business premises.

Box 22 - Repairs and renewals of property and equipment

QuickBooks account detail type	Allowable expenses	Disallowable expenses
Property, repair and maintenance	Repair and maintenance costs of business premises and equipment, replacement of small tools and equipment.	Private or non-business portions of these expenses; improvement or alteration costs for premises or equipment.

Box 23 - Phone, fax, stationery and other office costs

QuickBook account detail type	Allowable expenses	Disallowable expenses
• Office/general administrative expenses • Distribution costs • Dues and subscriptions	Telephone and fax running costs, postage, stationery, printing, and small office equipment and software costs.	Private or non-business portions of these expenses.

Tip: If you use the same phone for business and private use, use itemised bills to calculate the business portion.

Box 24 - Advertising and business entertainment costs

QuickBooks account detail type	Allowable expenses	Disallowable expenses
Advertising/promotional	Advertising in newspapers, directories, mailshots, free samples, and website costs.	Entertaining clients, suppliers, and customers, or hospitality at events.

Box 25 - Interest on bank and other loans

QuickBooks detail account type	Allowable expenses	Disallowable expenses
Interest Paid (up to £500 per year)	Any interest on bank and other business loans, and alternative finance payments.	Not applicable to this category.

Box 26 - Bank, card and other financial charges

QuickBooks account detail type	Allowable expenses	Disallowable expenses
• Card charges Bank charges • Equipment rental • Penalties and settlements • Exchange gain or loss • Finance Costs (up to £500 per year total for all above items)	Bank, overdraft, and card charges; hire purchase interest and leasing payments; and alternative finance payments.	Private or non-business portions of these expenses; repayment of loans, overdrafts, or finance arrangements.

Box 27 - Irrecoverable debts written off

QuickBooks account detail type	Allowable expenses	Disallowable expenses
Bad debts	Any amount in your turnover that is unpaid and written off.	Any debt not included in turnover, debts relating to fixed assets, and general bad debts.

Tip: Consult your accountant if you have irrecoverable debts and need help claiming them as an allowable expense.

Box 28 - Accountancy, legal and other professional fees

QuickBooks account detail type	Allowable expenses	Disallowable expenses
• Legal and professional fees • Insurance	Fees for accountants, solicitors, surveyors, architects, and other professionals, and premiums for professional indemnity insurance.	Not applicable to this category.

Box 29 - Depreciation and loss/profit on sale of assets

QuickBooks account detail type	Allowable expenses	Disallowable expenses
• Depreciation • Amortisation	QuickBooks doesn't track assets and depreciation. Consult your accountant for help claiming this allowable expense.	Depreciation of equipment or cars, and losses on sales of assets are not allowable expenses.

Box 30 - Other business expenses

QuickBooks account detail type	Allowable expenses	Disallowable expenses
• Dues and subscriptions • Other miscellaneous service cost • Other miscellaneous expense • Cash expenditure expense	Trade/professional journals and subscriptions; other sundry business expenses not included elsewhere; and net VAT payments.	Private or non-business portions of these expenses; protective overalls, headgear, gloves, and specialised clothing; payments to clubs, charities, or political parties; ordinary clothing bought for work.

Tip: All expenditures must be wholly and exclusively for your business.

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