“Self Assessment Tax Return” – the four words that send shivers down the spine of every self-employed worker in the UK. Being a self-employed delivery driver comes with its own list of responsibilities, from keeping financial records to understanding how to navigate the tax system; it can all be a bit of a minefield. For many individuals who are self-employed, one of the crucial parts of Self Assessment is grasping which expenses you can claim as allowable expenses to reduce your tax liability.
Simply put, this means that you can deduct some of the costs you incur as expenses, meaning your overall earnings after these deductions are lower. This is the amount you pay tax on so it makes sense that you claim for everything you are legally entitled to to reduce your tax bill.
In this guide, we’ll detail the ins and outs of allowable expenses, helping you to make the most of your hard-earned income.
Please note it is essential that you take financial advice from your accountant or the HMRC website, as this is simply a guide.
Understanding Allowable Expenses
So, let’s start with the basics: what are allowable expenses? Put simply, they are the expenses that you can deduct from your income when calculating your taxable profits. They serve as a way of recognising the costs associated with being a self-employed delivery driver. These expenses ultimately reduce the amount of your income that is subject to taxation. Understanding allowable expenses is essential for ensuring you’re not paying more tax than necessary and keeping more of your hard-earned cash.
While you should look to use your allowable expenses where possible, it is essential that any expenses you claim for must be wholly and exclusively for business purposes. If you are claiming for expenses that are not for your business, you may face large penalties from HMRC. Keep this in mind when keeping your records and completing your self-assessment tax return and always consult a professional.
Allowable Expenses Overview
Let’s delve into some common allowable expenses that you can claim as a self-employed delivery driver in England:
- Vehicle-related costs, eg. vehicle lease, fuel, parking, train or bus fares.
- Home Office costs, eg. a portion of your rent, stationery or phone bills.
- Protective Clothing and Equipment.
- Financial costs, eg. insurance or bank charges.
- Marketing and Advertising, eg. website costs.
Common Allowable Expenses for Self-Employed Delivery Drivers
Vehicle-Related Expenses
As a delivery driver, your vehicle is likely your highest expense. Luckily, you can claim a variety of vehicle-related expenses. However, it’s crucial to separate personal and business usage to determine the portion that qualifies as an allowable expense.
| You can claim for: | You cannot claim for: |
|---|---|
| Vehicle Insurance | Non-Business Driving or travel costs |
| Repairs and Servicing | Fines |
| Fuel (Mileage allowance relief) | Travel between home and work |
| Tolls and Congestion Charges | |
| Parking | |
| Hire/Lease Charges* | |
| Vehicle Licence fees | |
| Breakdown Cover | |
| Train, Bus, Air, and taxi fares | |
| Hotel Rooms (you only) | |
| Meals on overnight business trips |
- There are different allowances on Vehicle Leasing for Self Employed Delivery Drivers who are VAT Registered. For more detailed information, view the HMRC Motoring Expenses documentation.
Mileage Allowance Relief
As a self-employed delivery driver, you use your vehicle for business purposes, so you may be eligible for mileage allowance relief. This relief allows you to claim a fixed amount per mile for the business-related use of your personal vehicle. Keeping accurate mileage records is essential for making the most of this deduction. (More information can be found on HMRC website).
Simplified Expenses vs. Actual Cost
You may be able to calculate your car or van expenses using a flat rate (known as simplified expenses) for mileage instead of the actual costs of buying and running your vehicle. It is worth checking to see if this could save you more money on your self-assessment.
Check to see if simplified expenses could save you money here.
Home Office Expenses
If you use a space at home for administrative tasks related to your self-employment, you can claim expenses associated with it, such as a portion of your rent, utilities, and office supplies.
| You MIGHT be able to claim a proportion of your costs for things like: |
|---|
| Heating |
| Electricity |
| Council Tax |
| Mortgage Interest or Rent |
| Internet and Telephone Use |
| Stationery |
You’ll need to find a reasonable method of dividing your costs, for example, by the number of rooms /square metres you use for business or the amount of time you spend working from home.
For example: Steve has five rooms in his home, he uses one solely as an office. His electricity bill is £500 for the year. Assuming all of the rooms in Steve’s house use electricity equally, he could claim up to £100 as allowable expenses (£500 divided by five rooms).
As Steve only works one day a week from home, he could claim a maximum of £14.29 as allowable expenses (£100 divided by 7 days).
It is important to remember that if you claim the use of a dedicated room in your house as an office, then when you sell it, you may have to pay tax as it’s not part of your principal private residence.
For more information, see HMRC website.
Mobile Phone and Internet Expenses
Since communication and mobile data are vital to ensure you can successfully complete your daily delivery route, a portion of your mobile phone and internet bills can be claimed as allowable expenses if you use them for business purposes.
For example: Gary’s mobile phone bill totalled £240 for the year. Of this, he spent £140 on personal calls and £100 on business calls.
Gary can claim £100 of business expenses.
Protective Clothing and Equipment
Safety first! If you incur expenses for protective gear, such as high-visibility clothing or safety boots, the cost of these items can be claimed as allowable expenses.
| You can claim for: | You cannot claim for: |
|---|---|
| Branded Uniforms | Everyday clothing (even if you wear it for work) |
| Protective clothing exclusively needed for work |
Financial Costs
As with most self-employed roles, delivery drivers often incur many day-to-day financial costs ranging from insurance policies to bank charges or leasing payments. Being clear on the financial costs that you can claim could dramatically reduce your tax liability over the tax year.
| You can claim for: | You cannot claim for: |
|---|---|
| Hiring of accountants, solicitors, surveyors for business reasons | Legal costs of buying property and machinery |
| Professional indemnity insurance premiums | Fines for breaking the law e.g. speeding fines |
| Insurance Policies e.g. van insurance, goods in transit cover | Repayments of loans, overdrafts, or finance agreements. |
| Bank, Overdraft, and Credit Card Charges | |
| Interest on bank and business loans (if you are using cash basis accounting, you can claim a maximum of £500 in interest and banking charges) | |
| Hire purchase interest | |
| Leasing payments* | |
| Alternative finance payments |
- There are different allowances on Vehicle Leasing for Self Employed Delivery Drivers that are VAT Registered. For more detailed information, view the HMRC Motoring Expenses documentation.
Motoring expenses (VAT Notice 700/64)
Marketing and Advertising Costs
If you are spending money on promoting your delivery services, you can claim expenses related to marketing materials, online advertising, or website maintenance as these can all be deducted from your taxable income.
| You can claim for: | You cannot claim for: |
|---|---|
| Advertising in newspapers or directories | Entertaining clients, suppliers, and customers |
| Bulk Mail advertising | Event Hospitality |
| Online Advertising | Payments for political parties |
| Website Costs | Gym membership fees |
| Subscriptions to trade or professional journals | Donations to charity – but you may be able to claim for sponsorship payments |
| Trade body or professional organisation membership (if related to your business) |
Maximising Tax Deductions
To make the most of your allowable expenses:
- Join the HMRC support service: HMRC offers various self-employment webinars and support videos, giving you detailed information about allowable expenses and a clear insight into the rules around car expenses. Join their email subscription to be informed of their regular webinars.
- Keep accurate records: Track your expenses diligently, including invoices, receipts, and mileage logs. There are various online platforms that can make it easier to collate all your information e.g. QuickBooks, Xero, or Sage. These must be kept for at least six years.
- To ensure your records hold up to the legal standards of tax law, it is essential that any expenses must be wholly and exclusively for business purposes.
- Consult a tax professional: A qualified accountant or tax advisor can provide personalised guidance on your specific business circumstances.
- Stay updated: Tax laws and regulations can change, so it’s crucial to stay informed about any updates that may affect your allowable expenses. Check the HMRC website regularly or consult with a tax professional.
Conclusion
Understanding allowable expenses and making the most of your tax deductions as a self-employed delivery driver will help you maximise your profits and the money you get to keep. By keeping accurate records, you can reduce your tax liability within the boundaries of tax law.
It is essential that you seek professional advice to ensure your allowable expenses are correct and to maximise your tax deductibles based on your personal circumstances.
