Understanding allowable expenses for life coaches
As a self-employed life coach operating in the UK, understanding what you can claim for phone and internet is fundamental to optimising your tax position. These utilities are essential tools for client communication, marketing, and business administration, but they often represent a mixed-use expense. HMRC recognises that sole traders use these services for both business and personal purposes, and the key to a successful claim lies in accurately apportioning the business use percentage. Getting this right can significantly reduce your taxable profit and your overall self-assessment tax bill. For the 2024/25 tax year, the basic rate of Income Tax is 20% on profits between £1,001 and £37,700, meaning every £100 of correctly claimed expense could save you £20 in tax.
Many life coaches underestimate their legitimate claims or, conversely, risk HMRC scrutiny by over-claiming. The rules are specific, and maintaining robust records is non-negotiable. This is where modern tax planning software becomes invaluable, helping you track usage, calculate proportions, and maintain the evidence needed for HMRC compliance. This guide will break down exactly what you can claim for phone and internet, providing clear methods and examples to ensure you maximise your deductions correctly.
Claiming for mobile phone costs
If you have a mobile phone contract that is used solely for your life coaching business, you can claim the full cost of the line rental and call charges as a business expense. This is the simplest scenario. However, most coaches use a single phone for both business and personal calls. In this common situation, you cannot claim the full cost of the line rental. Instead, you must identify and claim only the cost of business calls.
To do this effectively, you need a detailed itemised bill. You can then highlight all calls made to clients, prospective clients, and other business-related numbers. The total cost of these calls is your claimable amount. If your tariff includes a bundle of minutes and texts, you need to work out the cost per unit. For example, if your monthly tariff is £30 for 500 minutes and you use 150 minutes for business, you can claim (150/500) * £30 = £9 per month, or £108 for the tax year. A dedicated tax calculator can automate this apportionment, saving you time and ensuring accuracy.
If you purchased the handset itself for business use, you may be able to claim it as capital allowances or through the Annual Investment Allowance (AIA), depending on the cost and whether it's used exclusively for business.
Claiming for home broadband
Claiming for your home broadband follows a similar logic of apportionment. Since your internet connection serves the entire household, you need to establish a fair and reasonable method to determine the business use percentage. HMRC will accept a claim based on the amount of time the internet is used for business purposes compared to its total use.
A robust method is to keep a usage diary for a typical month. Log the time spent online for business activities—such as conducting online coaching sessions, emailing clients, managing your website, and professional development—versus personal browsing, streaming, or family use. For instance, if your diary shows that 40% of your total internet usage is for your life coaching business, you can claim 40% of your total annual broadband cost.
Let's say your broadband costs £360 per year. A 40% business use claim would be £144. At the 2024/25 basic tax rate of 20%, this claim saves you £28.80 in tax. This is a crucial part of understanding what you can claim for phone and internet. Using a tax planning platform with expense tracking features helps you maintain this diary digitally and applies the percentage automatically to your recurring bills.
The simplified flat-rate method
For those who work from home for more than 25 hours a month, HMRC offers a simplified flat-rate method for claiming household expenses, which can include a contribution towards phone and internet costs. For the 2024/25 tax year, the rates are:
- 25 to 50 hours per month: £10 per month
- 51 to 100 hours per month: £18 per month
- 101 or more hours per month: £26 per month
This method is administratively simple, as it requires no detailed bills or usage logs. You simply claim the fixed amount based on your monthly homeworking hours. However, it's important to note that this flat rate is intended to cover all additional household costs, such as heating and lighting. It may not be the most beneficial option if your actual costs for phone and internet are high. You should calculate your claim using both the detailed apportionment method and the flat rate to see which gives you the larger deduction. This kind of tax scenario planning is a core strength of modern tax software.
Record-keeping and evidence for HMRC
Regardless of the method you choose, meticulous record-keeping is essential. If HMRC enquires into your tax return, you must be able to substantiate your claims. For phone expenses, you should retain itemised bills for a representative period, clearly marking the business calls. For internet claims, your usage diary is your primary evidence. You should keep these records for at least 5 years after the 31 January submission deadline of the relevant tax year.
Good practice involves:
- Filing digital copies of all phone bills.
- Maintaining a contemporaneous log of business internet usage.
- Keeping a record of the calculation method used for apportionment.
This level of organisation not only ensures HMRC compliance but also provides a clear picture of your business expenses. A comprehensive tax planning software solution includes document management features to securely store this evidence, making tax time far less stressful.
Putting it all together: A practical example
Let's consider Sarah, a self-employed life coach. She uses her personal mobile for business and has a home broadband connection shared with her family.
- Mobile Phone: Her monthly contract is £25. From her itemised bill, she identifies that business calls cost £8 per month (£96 per year).
- Broadband: Her annual cost is £300. Her usage diary shows 35% business use, so she claims £105.
Her total claim for the year for what she can claim for phone and internet is £201 (£96 + £105). As a basic rate taxpayer, this reduces her tax bill by £40.20. If Sarah worked from home for 30 hours a month, the flat-rate method would give her £120 (£10 x 12 months). In this case, the detailed apportionment method is more beneficial. This example highlights why it's critical to calculate both options.
Ultimately, knowing what you can claim for phone and internet is a powerful way to reduce your tax liability legally and efficiently. By adopting a systematic approach to tracking and calculation, you can ensure you are not overpaying tax. Leveraging technology designed for UK sole traders, like the tools available at TaxPlan, transforms this complex task into a simple, automated process, giving you peace of mind and more time to focus on coaching your clients.
