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HMRC states that anything you claim must be ‘wholly and exclusively’ for business purposes, but it isn’t always straight forward to save on your tax bill as sometimes there are different rules for the self-employed and business owners. We explain some of the allowances below.
1. Start-up costs
There are unavoidable costs when starting up a business, but you can claim for relevant start-up costs up to seven years before the business begins operating. Expenses such as computers including software, professional fees, internet and web domain fees, and advertising are all tax-deductible.
In addition to this, any expenses that are paid for using personal funds can be claimed once the company starts trading. Therefore, keeping receipts and accurate records is essential as you’re going through the start-up process.
2. Gas, electricity, water, council tax for running your business at home
If you work from home, you can claim a percentage of your household bills. For example, if your office accounts for 20% of your total household space, you can claim 20% of the costs against tax – including the interest portion of your mortgage repayments as well as utility bills and council tax.
HMRC also offers simplified expenses for working from home which is currently:
- £10 a month if you work between 25 and 50 hours a month;
- £18 a month if you work between 51 and 100 hours; and
- £26 a month if you work 101 or more hours a month.
3. Office repairs and maintenance
If you work from business premises, you can claim tax relief on rent and any repairs and maintenance to the premises and equipment.
4. Travel expenses
If you travel using a bike, repairs, maintenance, and insurance are all deductible for business use on a mileage basis and you can claim 20p per business mile.
If you use a car or van; you can claim allowable business expenses for vehicle insurance and breakdown cover as well as mileage on a percentage basis depending on how much you use the vehicle for purely business purposes, not including commuting.
Motorcycles are cheaper at a flat rate of 24p per mile.
Whether a limited company or self-employed, you can also claim the cost of any training, CPD or seminar attendance if the training is solely for business purposes, so updating or maintaining professional qualifications would be allowable.
The rules are different for the self-employed and limited companies when it comes to adding new skills to the business.
For a limited company, training related to setting up a new trade within a business qualifies as work-related training and corporation tax relief is likely to be available.
For the self-employed, training in a new skill is classified as capital expenditure and so cannot be deducted for tax purposes although it may be possible to claim Capital Allowances as the training is seen as an asset of the business.
6. Bank charges
Costs for hiring an accountant or lawyer, are tax-deductible but you can also claim tax relief on bank fees, overdrafts, credit card charges, interest on bank and business loans, hire purchase interest and leasing payments.
7. Clothes and uniforms
The cost of a uniform and protective clothing is included as tax-deductible items.
Professional subscriptions related to your business are deductible which could include: subscriptions to trade and professional magazines;
professional membership fees if necessary for your wok;
annual subscriptions to approved professional bodies
Donations to a registered charity by a limited company are a deductible expense. Unfortunately, donations by sole traders don’t count but for a higher rate taxpayer may be able to claim some tax relief if Gift Aid is included. The charity can claim back the basic rate of tax on the donation and the taxpayer can claim tax relief on the difference between the tax relief the charity has claimed and the higher rate.
10. Mobile telephones
Either purchasing a mobile phone or taking out a mobile contract for work purposes, is tax-deductible, and you are also allowed to claim for any expenses you incur providing your employees with mobile phone services.
The business has got to pick up the full cost of the phone to be able to claim it as a business expense. If an employee contributes anything towards their work-based mobile phone that means it is not tax-deductible.
11. Life Insurance
For the self-employed or the director of a limited company, some types of life insurance can be claimed as a business expense as long as the policy is taken out through the business.
12. Staff celebrations
Money spent entertaining staff can be tax deductible.
You’re exempt from paying tax on any work party or social event if:
- it’s an annual event like a Christmas party;
- the maximum spend is £150 or less per person on the party;
- the party must be open to all employees
13. Unpaid invoices
Unpaid debts and invoices can be claimed against business income.
If traditional accounting is used:
A business is allowed to claim every item of bad debt if there is absolutely no expectation that the invoices being claimed will be recovered.
If cash basis accounting is used:
It is not possible to claim bed debts using cash basis accounting as only the money actually received is recorded.
14. Employee eye tests
Health and safety legislation in the UK (except Scotland as tests are provided free of charge to everyone) means that employees who use a computer monitor or another screen for work-related purposes are entitled to receive regular eye examinations – and companies are allowed to claim the cost of this on Company Tax Returns.
15. Business trips
If you or any employees have made business trips requiring air travel, the total cost of that travel is tax-deductible as long as it is proven that the flight costs were 100% work-related.
16. Business gifts
Business gifts whether to clients or employees are treated as allowable expenses as long as:
- The cost of the gift is £50 or less;
- the provision of the gift is not part of a contract;
- the gift can’t be cash or a cash voucher; and
- it shouldn’t be a reward for work or performance.
17. Parking fees
Any car parking charges you pay as part of a business journey are tax-deductible as long as the trip made is either made as part of work or travel to a temporary workplace.
If you give your employees money to pay for parking charges, that counts as employee earnings so tax and National Insurance would need to be deducted.
18. Company broadband
As long as it is required by the business, HMRC allows you to claim the cost of installation and running costs of broadband.
That means you can deduct the costs associated with setting up a broadband contract for your work premises, home office (as long as it’s in the company name) or even at an employee’s home if your company is footing the bill.
Disclaimer: Information provided by Kidwells Accountancy on our website is for informational purposes only. It is provided in good faith but we make no guarantee of any kind regarding the accuracy, reliability, or completeness of any information on our site. We always recommend businesses seek independent legal and financial advice before working with us or acting on any information on our website.