If you are self employed and preparing a Making Tax Digital quarterly update, reviewing your business expenses should be part of your regular bookkeeping routine.
Accurate expense records can help you calculate your taxable business profits correctly and avoid missing legitimate deductions. They can also help you avoid claiming costs that HMRC does not allow.
With the first quarterly update of the 2026 to 2027 tax year now due, it is a good time to check that your records are complete and accurate. HMRC confirms that quarterly updates include totals for the income and expense categories used for your self employment or property income.
What are allowable business expenses?
Allowable expenses are genuine business costs that can normally be deducted when calculating your taxable profits.
For self employed individuals, an expense generally needs to be incurred wholly and exclusively for the purposes of the trade. If an expense has both a business and private purpose, you need to take care when deciding whether any part can be claimed.
This means you should not simply include every payment made from your business bank account.
Review your office and business costs
Start by checking your everyday operating costs.
Depending on your circumstances, these may include:
- Stationery and printing
- Business phone and internet costs
- Business software
- Postage
- Rent for business premises
- Business rates
- Utilities
- Business insurance
- Repairs and maintenance
- Advertising and marketing
HMRC confirms that qualifying office costs, business premises costs and certain equipment costs can be allowable, although the treatment can depend on your accounting method.
If you work from home, you should be particularly careful when calculating the business proportion of household costs.
Check your travel expenses
Business travel can be an important expense for many self employed workers.
Depending on the circumstances, allowable travel costs can include:
- Fuel
- Vehicle insurance
- Repairs and servicing
- Parking
- Public transport
- Hotel accommodation
- Meals on qualifying overnight business trips
However, ordinary private travel and travel between home and a permanent workplace cannot normally be claimed.
You may also be able to use simplified expenses for certain vehicle costs instead of calculating actual running costs.
Check equipment and larger purchases
Do not automatically treat every equipment purchase as an ordinary business expense.
The tax treatment can depend on whether you use cash basis accounting or traditional accounting.
For example, computers and printers may be treated as allowable expenses under cash basis accounting, while capital allowances may apply under traditional accounting.
If you are planning to purchase expensive equipment, check the tax treatment before entering the cost into your records.
Review professional and financial costs
Business expenses can also include certain professional and financial costs.
Depending on the circumstances, you may be able to claim:
- Accountancy fees for business purposes
- Business legal fees
- Professional insurance
- Bank charges
- Business credit card charges
- Interest on qualifying business loans
- Certain leasing or finance costs
However, HMRC does not allow every professional or financial payment. For example, the cost of preparing and submitting your Self Assessment tax return cannot normally be claimed as a business expense.
Check clothing and training costs
Some costs that appear to be business related may not automatically qualify.
You can generally claim for qualifying uniforms, protective clothing and certain costumes used for work. Ordinary everyday clothing cannot normally be claimed, even if you wear it while working.
Training can also be relevant where it is related to your existing business activities. It is important to consider the specific circumstances before claiming the cost.
Do not forget mixed business and private costs
This is one of the areas where mistakes can easily occur.
For example, if you use your phone, vehicle or home for both business and private purposes, you may need to identify and claim only the business proportion.
HMRC guidance allows an identifiable business proportion of certain mixed costs to be deducted where that proportion is genuinely attributable to the trade.
Keep a reasonable record of how you calculated the business proportion so you can explain the figure if necessary.
Keep supporting evidence
Reviewing your expenses is not only about entering figures into accounting software.
You should also keep supporting documents such as:
- Receipts
- Invoices
- Bank statements
- Mileage records
- Business contracts
- Relevant correspondence
For Making Tax Digital, you must create and store digital records of relevant business income and expenses. HMRC also confirms that you must continue keeping original records or supporting documents used to prepare your tax return, such as invoices and bank statements.
Check your figures before submitting your update
Before sending your quarterly update, carry out a final review.
Check that:
- All business income has been recorded
- Allowable expenses have been included
- Private expenses have been removed
- Duplicate transactions have been identified
- Receipts and invoices are available
- Expenses have been placed in the correct categories
- Your bank records agree with your bookkeeping
Making Tax Digital quarterly updates contain totals for the relevant income and expense categories. Your software calculates the figures from your digital records, allowing you to check them before submission.
Remember that a quarterly update is not a tax return
It is important not to confuse your quarterly update with your final Self Assessment tax return.
A quarterly update is a summary of your income and expenses. You do not normally make all your year end tax adjustments before sending it.
After the fourth quarterly update, you may need to make adjustments, claim applicable reliefs and allowances and include other information before submitting your tax return.
Avoid common expense mistakes
Common problems include:
- Claiming personal spending as business expenses
- Forgetting allowable costs
- Entering the same expense twice
- Using incorrect expense categories
- Failing to keep supporting evidence
- Claiming the full amount of a mixed business and private cost
- Treating capital expenditure as an ordinary expense without checking the rules
Taking time to review your records before submission can make your quarterly reporting more accurate and easier to manage.
How Tax2u can help
Keeping track of business expenses can become difficult when you are also running your business.
Tax2u can help you review your bookkeeping, identify potential allowable expenses, organise your records and prepare your tax information in line with HMRC requirements.
A careful review can give you greater confidence that you are claiming legitimate tax deductions without overstating your expenses.
If you need help reviewing your business expenses or preparing your Making Tax Digital update, get back to us at Tax2u. We are here to help you keep your records accurate, claim what you are entitled to and stay on track with HMRC.