Starting and running a limited company involves various financial aspects. It’s important that you are managing your company’s finances effectively, so ensuring that you understand your allowable business expenses is crucial when optimising your tax liabilities.
Remember, these expenses must have the sole purpose of helping you to run your company, to qualify as a business expense.
So read on to find out some of the typical business expenses you could be missing out on, and the criteria that is needed for them to be deducted from your company’s income.
Accommodation
Often in business, you may have to spend a night away from home. You can often claim the accommodation costs as a business expense, if the night away is solely for work use.
If you do have some personal use mixed in with your stay, you will not be able to claim this as a viable business expense.
Subsistence
Following on from any accommodation costs, your business trip might result in you having to buy food and drink that you would not normally purchase.
These expenses can include breakfast, lunch or dinner, as long as it is deemed an additional cost to your usual schedule. Also, you can claim £5 per night for any incidental expenses, such as for a magazine or newspaper, during your overnight trip!
Transport
When calculating any business expenses for your travel, it can include anything from both mileage or fuel costs, public transportation costs, or even toll fees and congestion charges.
Of course, these trips must be exclusively for business, and cannot simply consist of travelling to and from your usual place of work. For example, travelling to a temporary place of work could qualify, as well as trips for make deliveries.
Working from Home
It’s important to know that you don’t need to be travelling for work to claim business expenses. In fact, simply using part of your home for business can allow you to claim for business costs of up to £6 per week.
Equipment
Costs for business-related software and equipment, which has been purchased exclusively for business use, can be claimed for tax relief. Equipment can include printers, scanners, computers and even office furniture or stationery!
Mobile phones
As well as computer equipment, you will receive no tax implications if you purchase a mobile phone directly through your company’s bank account.
Remember, you cannot simply compensate the cost of a personal phone that you already own, as this could result in some tax you can easily avoid.
Accountancy Fees
Although you can claim tax relief on your accountancy fees, this will not include expenses paid for personally, such as Self Assessment tax returns.
Professional Subscriptions
Costs of subscriptions that are occupation-specific, such as software or magazines, can be claimed as a business expense. To avoid any tax implications, it’s always a good idea to check the HMRC list of approved subscriptions.
Work Clothing
The deductibility of clothing as a business expense depends on the nature of the clothing and how it is used in the business.
In general, clothing that is a uniform or necessary for protection in a specific work environment may be deductible. This includes items like branded uniforms, safety gear and specialised clothing required for the nature of the job.
Training
If your limited company incurs costs related to training and development that are wholly and exclusively for the purpose of carrying out its trade or business, these expenses can be claimed.
From employee training to professional development for you or your employees, the costs can be claimed if it is work-related.
Business Entertaining
Expenses incurred while entertaining clients or customers, such as meals, events or outings, may be deductible to some extent. However, these expenses will not be eligible for relief from Corporation Tax.
Pension Contributions
When a limited company makes contributions to pension schemes, these contributions are often treated as a legitimate business expense and can be a tax-efficient way to save towards your retirement. Just set up an agreement with a provider, and you can contribute to your pension and get complete tax relief.
Business Insurance
The premiums paid for business insurance are considered a necessary cost of running the business, protecting your limited company from risks and liabilities.
Business insurance may include various types of coverage such as liability insurance, property insurance, professional indemnity insurance, employer’s liability insurance and other forms of coverage necessary to protect the business against specific risks.
Annual Employee Events
Organising events for employees, such as holiday parties or team-building activities, can be claimed as a business expense. However, the cost must be no more than £150 per person and the event must be open to all employees.
Has this been useful? Get in contact with our team if you want to find out more today!
