In business, it’s not only what you make that matters. It’s also knowing what you can and can’t claim as a business expense that could improve your business finances. Of course, if you’re running an accountancy firm you will already have forensic insight into your tax bill. But for the rest of us, knowing how to make your company more tax-efficient will help ultimately reduce what you have to pay.
There are different rules for limited companies and being self-employed. But the two rules we should all be following are: keep accurate records of your running costs and hold on to those receipts. And ensure that the expense is for business use only or a portion of the claim is reduced to reflect the personal use.
For limited companies:
Eye tests and health checks:
If your business involves employees spending a considerable part of their job in front of a screen then you can claim the cost of their eye tests as well as any health checks. You can also claim the cost of any eyewear too – but only if it’s used exclusively for work.
From public liability, employers liability, professional indemnity and contents – your insurance policies can all go through your tax bill. Legal and professional fees are also allowable.
If business requires you to stay away from home you can put through the cost of your accommodation. If you choose to extend your trip for leisure purposes you can only claim for the business portion though. HMRC will likely also question any overly-extravagant hotel choices.
Whether it’s a one-off cost or ongoing payments, any paid-for efforts to help attract customers or promote your company can all be claimed.
If it’s wholly for business then things like bank charges, HP interest and leasing payments are all allowable business expenses.
You can’t claim for yours or your staff’s commute but if travelling is part of the role then some costs can be reimbursed. Briefly, if you use your own vehicle you can claim a rate per mile, if it’s a business car you can claim the cost of the fuel. Other costs that could be claimed include breakdown cover, parking, insurance, repairs and servicing – but you can’t claim for non-business driving costs or any fines you collect. You can also claim business mileage for cycling.
By donating to charity – whether it’s money, stock, land or seconding your staff – you can reduce your corporation tax bill.
Employees are eligible to claim tax relief through their salary with either the Childcare Voucher Scheme or the Tax-Free Childcare Scheme.
You can spend £150 per employee per year on annual events. This could be a Christmas party or events throughout the year. You can also invite non-employees (such as employees’ partners) but the majority of those in attendance need to be staff.
If you’re wondering what is the best way for recruitment agencies to offer employee rewards? Or why recruitment agencies need to complete P11D forms, our experts have written some further advice for you.
Staff salaries, bonuses, pensions, national insurance, training, trivial benefits and subcontractors can all be claimed.
Anything you need in order to run your business – from stationery and computers, through to desks and coffee – can be claimed. They must be solely for business use. With fixed assets HMRC will need to know if you continue to use them, sell them or dispose of them.
Membership to professional networks such as APSCo or REC are allowable. Even golf memberships assuming these are for business use only.
With everyone remote working you can claim £6 per week if you work from home regularly.
For self employed sole traders:
If you’re a sole-trader then you can claim as above with a few exceptions. Again, it’s vital you prove the claim is solely for a business-related expense.
You can either claim the full running costs of your vehicle, including insurance, fuel and repairs, less a percentage to cover the personal use where necessary. Or you can claim HMRC’s business mileage rate for journeys. You can claim tax relief on the cost of a new bike if it’s for business use, but not business mileage rates for its use.
You’re not able to claim for buying your premises. But you can claim for rent, utility bills, insurance, security, business rates and use your home as an office.
The following are not allowable expenses for sole traders:
- Childcare costs (though tax relief can be claimed through an approved scheme)
- Charitable donations
- Health and medical insurance
- Pensions (though you can claim personal tax relief)
- Phone/internet line rental (if it’s for both personal and business use)
If you’re in any doubt about what you can and can’t claim for then speak to us for friendly, helpful and tax-efficient advice.