Claiming the right expenses is one of the simplest ways to reduce your tax bill, yet a lot of people either miss legitimate costs or claim things they should not. Here is how it works.
The golden rule
For a cost to be an allowable business expense, it generally has to be incurred wholly and exclusively for your business. If something has both a business and a personal use, you can usually only claim the business portion.
Use your mobile phone half for work and half personally? Claim half. Drive your car for business and family trips? Claim the business mileage only.
Common allowable expenses
- Office costs, such as stationery, software and phone bills.
- Travel for business, including mileage, train fares and parking (but not your normal commute).
- Staff costs, including salaries and subcontractor payments.
- Stock and raw materials you buy to sell on.
- Professional fees, including your accountant and certain insurances.
- A reasonable claim for working from home.
Things people get wrong
- Entertaining clients is generally not allowable for tax, even though it is a real business cost.
- Ordinary clothing is not allowable, even if you only wear it for work. Genuine uniforms and protective gear are different.
- Fines and penalties, such as parking tickets, are not allowable.
Limited companies are slightly different
If you run a limited company, the rules have extra layers, such as how you handle director expenses, benefits in kind, and the choice between salary and dividends. Getting this right can make a real difference to how much tax you and your company pay.
The honest truth is that a short conversation with an accountant often pays for itself here. We make sure you claim everything you are entitled to, and nothing you are not. Get your instant quote to get started.