Earnings from self-employment

Self Employed: Allowable Expenses

Self-employed people’s gross earnings are worked out as the gross profit of the business less certain allowable expenses.

Allowable expenses include:

  • repayments of capital on loans used to replace or repair equipment needed for the business
  • the cost of replacing or repairing equipment needed for the business
  • Interest paid on business loans
  • VAT paid in excess of VAT received
  • expenses paid for the purposes of the business
  • bad debts that have been defaulted on.

They don’t include:

  • money spent on new equipment or to set up or expand the business
  • amounts for depreciation or write-offs
  • domestic or personal expenses not essential to the business
  • money spent on business entertainments or meals

Any losses you make during the period you are receiving benefits will be counted as nil income.

You can enter your gross self-employed earnings (less the amounts shown on your accounts for allowable expenses) and let the calculator work out your net self-employed earnings automatically. Alternatively you can directly enter your net self-employed earnings.

For tax credits, if your self-employed earnings are lower than the national minimum wage multiplied by the hours you have said you work, HMRC may carry out checks on your self employed activity. See our Gainful Self-employment page for further details.

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