Are business expenses taxed?
Many business owners are unsure as to which business expenses are allowable – by which we mean expenses which can be deducted from income in determining the profits on which your business will be required to pay tax. Below we give just a few examples of the many types of allowable expenses.
Revenue and capital expenses
A capital expense is used to purchase an asset you want to use for a reasonable amount of time, say a year or more. A revenue expense covers a shorter period. Most daily costs are revenue expenses. Capital expenditure may qualify for capital allowances, but not all revenue expenses are allowed for tax reasons. Capital equipment is almost invariably subject to a write-down period which means that only a proportion of the cost can be claimed in each financial year. No personal expenses will ever be allowable.
Telling HMRC about expenses
When you fill in your tax return, if your turnover is under £85,000, you only have to enter the total amount of your business expenses (but keep the full details in case HMRC needs to see them). Above this threshold, you will need to list your actual costs item by item.
Working from home
If you work at home, you can claim a percentage of certain household expenses including utilities, council tax and mortgage interest. There are some complexities here, depending on the proportion of the house used in connection with the business and the degree of exclusivity of that use.
You can claim a proportion of your motoring expenses, or claim flat rates per mile. This rate changes depending on whether you cover more or less than 10,000 miles per annum. Keep a record of how many miles you have covered for business purposes.
You may be able to claim for stays in accommodation close to your workplace. Contractors and freelancers who need to be in another city, for example, can make use of the allowance.
Expenses are claimed differently depending on who owns the bike. Meanwhile, the Cycle to Work scheme enables employers to buy bikes and safety equipment for employees. The equipment is tax deductible for the business, and protective equipment such as lights and cycle clips can be claimed for.
Books and magazines
If an item is needed to conduct the business, for example, a technical manual, it can be claimed.
Other allowable items include:
- Car parking
- Annual events
- Client entertainment (within strict limits and conditions)
- Course fees
- Sight tests
- Mobile and smartphones
How a prepaid card can help
Regardless as to the size of your firm, you will want to ensure that expenses accounting is streamlined and efficient. A prepaid card can offer significant advantages in this regard. Cash advances and petty cash can be challenging to manage. These traditional approaches are time-consuming, requiring staff to keep track of receipts and petty cash is inappropriate for all but the smallest out of pocket expenses.
A Soldo prepaid card, in contrast, can be loaded in advance with as much or as little money as required, with you or your finance team managing this in real-time via the Soldo web console.
No more surprises
Perhaps inevitably, where employees have free rein on their spending, there is a risk that they will incur substantial, unauthorised expenses. These can leave the business financially exposed with some unpleasant shocks at the end of the month. Soldo’s prepaid company card, in comparison, enables you to set limits on employee spending at individual cardholder level so that no one can get carried away. Limits can be easily changed using the Soldo web console.
Transfers made easy
With traditional company cards, you may need to pay fees to transfer money, and this process may take some time. With the Soldo card, transfers are free and instant.
Get a better picture of spending
The Soldo web console provides an overview of spending by department or individual, enabling a better understanding of company expenses and providing insights which could help your business grow.
Sign up, or contact our team of experts for further information and advice on controlling company expenses.