What expenses can I claim through my business?
Feb 08, 2019
Now that the self assessment season is over for yet another year, you can breathe a sigh of relief and concentrate properly on your business once more. However, dealing with your recent tax return may have highlighted some uncertainty about what expenses you can and can’t claim through your business.
Having a good understanding of what expenses you’re allowed to claim back can really help your business. Many small business expenses amount to less than £20, but these all add up! There are quite a number of different categories for allowable expenses, so we’ve summarised the key areas together with a bit more detail on what each category includes. This should give you a better idea of where you stand going forwards.
Business premises costs
You can claim back tax on:
- business rent
- property insurance
- business rates
- broadband and telephone
- electricity and heating
- water rates
- security costs
Working from home costs
If you work from home, claiming expenses can be a little more complicated. You can claim for a part of the running costs of your home, including:
- broadband and telephone
- home insurance
- mortgage interest or rent
- council tax
- repairs (affecting the space used for business)
This can be calculated by dividing up your bills by the number of rooms in your house, or by the area of each of your rooms, or by the time you spend working from home. Remember that it’s important to assign some of the time spent in your business space to personal use (e.g. keep a sofa bed in your home office for visiting friends), because if any part of your home is used solely for business then you may have to pay Capital Gains Tax when you come to sell your house.
If you’re a sole trader, using ‘simplified expenses’ can help avoid some of these complex calculations. This method means you can apply a flat rate to determine your tax relief on working from home. HMRC has an online checker which lets you see if this approach could help your business.
Stationery and software
You can claim expenses on the following items, which you would normally use for less than two years:
- printing, including ink and cartridges
- computer software licences
Your office equipment, such as printers and computers, can only be claimed as allowable expenses if you use cash based accounting. Otherwise, if you use traditional accounting they’ll need to be processed as capital allowances.
Clothes that form part of an everyday wardrobe, such as business suits, are not allowable for tax relief. However, if your business involves wearing a specific type of garment then you can claim tax relief as follows:
- uniforms – a uniform which clearly identifies what you do is tax deductible, but the socks and shoes you wear with it aren’t. Note too that there’s a distinction between uniform and branded clothing – the latter doesn’t necessarily identify your business, but you could still claim it as an advertising and promotion cost rather than a clothing expense
- PPE / safety gear – if you are a builder for example, you can claim tax relief on your hi-vis jacket, your steel toe-capped boots and your helmet, but the jeans and fleece that you wear with them aren’t allowable.
- Costumes – actors and entertainers can claim tax relief on the outfits they require to do their job
Travel expenses cover a broad area, including food and accommodation costs incurred when you’re away on business, and fuel and vehicle insurance fees associated with driving as part of your job.
There are various exceptions to the rules surrounding travel expenses, but an overall summary of what you can claim is as follows:
- vehicle insurance
- repairs and servicing
- parking (but not fines)
- hire charges
- vehicle licence fees
- breakdown cover
- train, bus, air and taxi fares
- hotel rooms
- meals on overnight business trips
A key thing to bear in mind is that you cannot claim any expenses for travelling from home to your normal place of work – this is classed as ordinary commuting. Only travelling between two different places of work, like your office to a meeting or a site visit, can be claimed as an expense.
If you need to pay for a meal when you’re away on business, or you’re staying in a hotel overnight, then the cost of this can be claimed for. However, if you travel from home to an early morning meeting with a client and choose to buy yourself breakfast, then you cannot claim this as an expense as it counts as ordinary commuting.
Motor expenses can be a very tricky area, because if you’re a sole trader it can be hard to separate the fuel you use for private and business travel. There are two different ways to calculate your business miles – you can keep a detailed log of every single journey and calculate what the overall proportion is for business use versus private use. You can then claim this percentage across all your motor expenses, including servicing, repairs and MOT as well as fuel. Or alternatively you can just record your business miles, and claim these miles according to HMRC’s Approved Mileage Allowance Payments. But this means that you can’t claim for any of the additional costs of running your car as they are already covered by HMRC’s mileage rate.
If part of your business involves buying stock or raw materials that you then sell on, these can be claimed as allowable expenses. You can also claim for the direct costs of producing any goods which you then sell on. However, you cannot claim for any goods or materials which are bought for private as well as business use. Nor can you claim for the depreciation of any equipment used for the production of goods.
Professional services fees
Running a business usually involves seeking professional advice at some point or another, whether it be for tax, banking, law, property or HR. The fees these professionals charge count as allowable expenses, and you can claim for:
- hiring of accountants, solicitors, surveyors and architects for business reasons
- business insurance, such as professional indemnity insurance and public liability insurance
- bank, overdraft and credit card charges
- interest on bank and business loans (but not the repayment itself)
- hire purchase interest and leasing payments
It’s possible to claim tax relief on the cost of producing marketing collateral, such as brochure mailings, promotional gifts, newspaper advertising and website content. You can also claim for the subscription costs to your industry trade journals and trade body memberships.
What you cannot claim for is the costs associated with entertaining clients, suppliers or customers, or any kind of event hospitality.
Employee and staff salaries count as allowable expenses, and you can claim tax relief on your employer National Insurance contributions too. It’s also possible to claim for:
- agency fees
- staff Christmas party – limited to £150 max per head per year
As you may have gathered, allowable business expenses can be a very complex and somewhat grey area! If you’re in any doubt about your specific circumstances, then your best bet is to speak to one of the team at Paish Tooth and to seek clarification with what exactly you can claim tax relief on.