As a business owner, it’s important to be aware of the various expenses you can claim back from the government. This guide will outline some of the main categories of business expenses you can claim for, as well as provide some useful tips on how to maximise your tax deductions.
Business Expenses You Can Claim For
1. Travel and accommodation: You can claim back any travel and accommodation expenses incurred while conducting business. This includes public transport fares, taxi fares, fuel costs, parking fees, and hotel/Airbnb bills. When claiming back travel expenses, make sure to keep all relevant receipts and documentation handy.
2. Entertainment: You can also claim for certain entertainment expenses, such as taking clients out for lunch or dinner, or tickets to business-related events. As with travel expenses, make sure to keep all relevant receipts when claiming for entertainment costs.
3. Office costs: You can claim back a proportion of your office costs, such as rent, electricity, and internet bills. The amount you can claim will depend on the size of your office and the amount of time you use it for business purposes.
4. Equipment and supplies: You can claim for the cost of any equipment or supplies used for business purposes. This includes items such as computers, printers, stationery, and software.
5. Marketing and advertising: You can claim back the cost of any marketing or advertising expenses incurred in promoting your business. This includes expenditure on print ads, online ads, and promotional materials.
6. Professional fees: You can also claim for professional fees relating to running your business, such as accounting and legal fees.
Can I Claim Expenses from Before I Formed my Limited Company?
Yes, you can claim business expenses from before you formed your limited company. However, you will need to have kept accurate records of these expenses in order to do so. This means saving receipts, invoices, and any other documentation that proves you incurred the expense.
Be sure to speak to an accountant or tax advisor if you’re unsure whether you can claim an expense from before you formed your limited company.
Can a Director Claim Expenses?
Yes, directors can claim business expenses. However, they will need to have kept accurate records of these expenses in order to do so. This means saving receipts, invoices, and any other documentation that proves they incurred the expense.
Director’s fees are classed as a business expense and can be deducted from a company’s profits before tax is calculated. This can reduce the amount of Corporation Tax that a company owes.
However, it’s important to note that director’s fees are not classed as an allowable expense for Income Tax purposes. This means they cannot be deducted from a director’s personal income when calculating their tax bill.
How to Deal with Employees' Expenses?
If you have employees, you may be responsible for reimbursing them for certain business expenses. These expenses could include travel costs, accommodation, and meals.
It’s important to have a clear expenses policy in place that sets out what expenses can be claimed and how they should be submitted. Employees should also be aware of any limits on the amount they can claim.
Reimbursing employees for business expenses can be a tax-efficient way to pay them. This is because the payments are not subject to income tax or National Insurance contributions.
However, there are some conditions that must be met in order for the payments to be classed as expenses. For example, the payments must be made ‘wholly, exclusively, and necessarily’ in the performance of the employee’s duties.
Do I Need to Keep Receipts for Business Expenses in the UK?
Yes, you will need to keep receipts for any business expenses you claim. This is because the HMRC (HM Revenue and Customs) may request to see these receipts as proof that you incurred the expense. Without receipts, you may find it difficult to substantiate your claims and could end up paying more tax than you owe.
What Are the Consequences of Not Claiming Business Expenses?
If you don’t claim business expenses that you’re entitled to, you could end up paying more tax than you need to. In addition, failing to keep accurate records of your expenses could lead to difficulties if the HMRC requests to see them. If you’re not sure whether you can claim a certain expense, it’s always best to speak to an accountant or tax advisor for guidance.
Other Related Reliefs and Allowances
There are a number of other reliefs and allowances that businesses can claim in addition to expenses. These include capital allowances, research and development tax credits, and the Enterprise Investment Scheme (EIS).
1. Capital allowances can be claimed on certain business assets, such as machinery and equipment. The amount of relief available will depend on the type of asset and when it was purchased.
2. Research and development tax credits are available to businesses that incur costs while carrying out research and development activities. The amount of credit available will depend on the level of expenditure incurred.
3. The Enterprise Investment Scheme (EIS) provides tax relief for investments made in certain types of businesses. The amount of relief available will depend on the amount invested and the type of business.
Capital Allowances on Business Assets
Capital allowances are a type of tax relief that can be claimed on certain business assets. These assets must be used for the purposes of the business and can include items such as machinery, equipment, and vehicles. The amount of relief available will depend on the type of asset and when it was purchased.
Businesses can also claim capital allowances on the costs of renovating or refurbishing commercial premises. However, there are certain conditions that must be met in order to qualify for this relief.
You can claim capital allowances when you sell, dispose of, or stop using an asset for business purposes. The amount of relief available will depend on the type of asset and when it was purchased.
Marginal Relief
Marginal relief is a reduction in the amount of Corporation Tax that a company owes. It’s available to companies with profits of between £300,000 and £1.5 million.
The amount of relief available will depend on the level of profits and the rate of Corporation Tax that applies. The maximum amount of relief that can be claimed is £90,000.
Patent Box
The Patent Box is a regime that provides tax relief for companies that generate income from patents. The amount of relief available will depend on the level of income and the rate of Corporation Tax that applies.
The maximum amount of relief that can be claimed is £80,000.
Tips for Maximising Your Tax Deductions
1. Keep accurate records: One of the most important things you can do to maximise your tax deductions is to keep accurate records of all your business expenses. This means saving receipts, invoices, and any other documentation that proves you incurred the expense.
2. Stay organised: Another key tip is to stay organised when it comes to your business finances. This will make it easier to keep track of your expenses and ensure you don’t miss any deductions come tax time.
3. Know the rules: Know what you can claim online ads, and promotional materials.
4. Professional fees: You can also claim for professional fees relating to running your business, such as accounting and legal fees.
5. Use accounting software: Utilising accounting software can also be a great way to keep on top of your business expenses and ensure you don’t miss any deductions. There are many different accounting software packages available, so be sure to choose one that best suits your needs.
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