Although we all have a duty to pay the correct amount of tax to HMRC, there is no reason you should not be aware of legitimate expenses that you can claim in business which are tax deductible.
To be tax deductible, expenses need to be incurred solely for the purpose of running the business. This means that they cannot have duality of purpose, which is a personal and a business use.
Please remember that you need to keep accurate records of business expenses and keep these records for 6 years from filing.
Below are some examples of tax deductible expenses that you might implement.
Home Working Expenses
HMRC allows a flat £4.00 a week home working expense if you do not have receipts. Alternatively, a proportion of household bills could be allowable.
The rule of duality of purpose applies here, only expenses necessary for running your business are allowable.
Telephone and Internet
If your telephone and broadband contracts are in the name of your company, they are likely allowable. You need to ensure that you are using them either only or at least mostly for business usage.
Travel and Subsistence
Travel and subsistence costs apply when you are away from your normal place of business. The cost of travelling to meetings would be an example of an allowable expense. Mileage allowances apply when you use your personal vehicle for business use. The current rate is 45p/mile for the first 10,000miles in a year, and 25p/mile thereafter. For help to claim travel costs, contact us today.
Salaries and/or sub-contractor costs
Salaries that you pay yourself or your employees are tax deductible expenses. However, if you pay yourself using dividends, these are not tax deductible expenses.
Bank Charges and Insurance Costs
Bank charges are allowable expenses if they are authorised charges. This would be your monthly bank charge.
Business insurances such as indemnity insurance are also allowable expenses for a limited company.
Office Equipment and Stationary
Office consumables such as paper and ink are claimable expenses. You can also claim for office equipment such as the computer or laptop used for work.
Advertising and Marketing
Marketing and advertising expenses incurred are allowable expenses.
Business Gifts and Entertainment
If you wish to give gifts to partners or employees, you can claim these up to £50.00 per person. It may come as a surprise, but entertaining clients is not an allowable expense. However, entertaining your staff, for example, a Christmas meal, is an allowable expense up to £150.00 per person.
This is not a conclusive list of allowable and disallowable expenses for limited companies.
If you wish to discuss your business expenses in more detail, please contact us.