What business expenses can I claim?
Whether self-employed or running your own limited company, you need to understand which of the costs of running your business are deductible for tax purposes and are allowable expenses. By carefully managing expenses and having an accurate figure for company spending, you will ensure that you are being taxed only on the proportion of your turnover which should be subject to assessment by the Revenue.
Allowable business expenses do not include money taken from the business for private purchases.
If you are employed and pay income tax through the PAYE system, there are a number of exployee expense areas which are relevant. These include:
- Mileage allowances
- Professional fees
- Charitable donations
- Uniforms or protective clothing
- Costs of working from home
If you are self-employed, there is greater scope for offsetting a greater range of expenses against taxation.
If you work from home and your office accounts for say 25% of your household space, you can claim that proportion of household bills against your tax bill. If on the other hand you use your home for a minimal amount of time and do not have a designated office space, HMRC allows a £4 per week office deduction.
Internet and phone
Similarly, the proportion of business use on your phone and broadband and line rental means that a percentage of your bill can be claimed as business use as against personal use. A computer or tablet which is purchased can also be proportionally offset, or the total cost can be deductible if it is solely used for the business. The same is true of software or ancillary equipment, such as printers and scanners, as well as stationery.
Vehicle insurance, servicing, repairs, fuel, hire charges, vehicle licence fees, parking and breakdown membership incurred in the course of business are all seen as tax deductible. The exceptions to this general rule are private mileage and speeding fines.
The costs of advertising in newspapers, directories and mail shots are all tax-deductible, as is the cost of designing and running a website. Professional fees and professional indemnity insurance can also be offset. Significantly, bank, overdraft and business credit cards charges, hire purchase interest and leasing costs incurred on behalf of the business can all be offset against your tax bill.
One area in which HMRC has reduced allowances is in corporate entertainment. Treating a client to lunch is now hardly ever tax deductible, and the same applies to sporting entertainment or similar treats for clients or suppliers.
Accurate expense reporting is crucial, and it will certainly help make tax time less stressful. All businesses should be aware of what they can and cannot claim. For example, if you are running a limited company, only costs incurred exclusively in the running of the company can be claimed against tax, these do not include any expenses which have a personal element. You can deduct any expense not explicitly disallowed by HMRC or which constitute capital expenditure write-down.
One of the main differences from the self-employed offsets is that telephone and broadband contracts, mobile and smartphone contracts and hire purchase agreements must all be in the company’s name.
Other costs which are deductible include:
- Executive pension contributions (via an approved scheme)
- Employers’ NIC payments on wages paid to employees
- Training course fees when relevant to the business
- Company formation and ongoing costs
- Business gifts up to £50
- Capital allowances or depreciation on assets
- Company car expenses benefit in kind for private use
- Eye tests for computer users in the company
- Private health checks for employees
Otherwise, the same rules apply as to self-employed companies regarding professional fees and subscriptions.
The time involved in managing these expenses can be costly so introducing a payment method using a prepaid business card can help reduce these costs. This will also prevent runaway spending and stretching credit limits, helping to control what employees can spend, and also ensuring that lost receipts are not an issue.
Contact us today for further information on our market-leading expense management solutions, such as prepaid corporate cards.