We meet a lot of people who are trying to run their business but find it hard to keep track of what they can claim for tax relief and what they can't.
So wouldn't it be nice to have an A-Z guide of the most common business expenses and costs?
Read through our list and make sure you are claiming tax relief on the right things!
You can claim for advertising in newspapers or directories, bulk mail advertising (mailshots),free samples and website costs.
You can’t claim for entertaining clients, suppliers and customers event hospitality.
This depends on what the animal actually does for that business.
Guard dogs, working animals, farm animals, veterinary services and guide dogs can call be considered to be eligible expenses .
Advertising and marketing
HMRC says that you can claim business costs for: bank, overdraft and credit card charges; interest on bank and business loans; hire purchase interest; easing payments; other alternative finance payments,.
If you’re using cash basis accounting you can only claim up to £500 in interest and bank charges.
You can’t claim for repayments of loans, overdrafts or finance arrangements, as these are capital items.
If you are using your personal account for your business banking, then you will need to consider how much you are using the account for business; if it is minimal usage then you should not claim any tax relief, however if it is mostly used for business, then you could include the costs, being prepared for the HMRC inspector visiting.
Bank interest & overdraft charges
You can claim all of the tax relief if your broadband is only used for business. Home broadband is a little different. You cannot claim relief on personal broadband costs, so if you are using one broadband for both personal and business use, you must work out the percentage that the broadband is used for business and claim on just that.
Calculate your allowable expenses using a flat rate based on the hours you work from home each month. For more info, click here.
Alternatively you can work out the proportion of personal and business use for your home, eg how much of your utility bills are for business.
Business use of home
Donations to charity or to community amateur sports clubs (CASCs) are tax free. and are usually claimed via your tax return form.
You’ll need to keep a receipt of all of your donations if you want to claim tax relief.
Charity and CASCs
Any clothing that can be considered 'everyday' clothing cannot be claimed on. For example, a suit might be purchased for work, but since you can wear it outside of work for personal use as well, you cannot claim on it. However, you can claim on uniform, protective work clothing and costumes (if you're an actor, actress, singer, entertainer).
Unless you are claiming simplified expenses, you can claim a proportion of your council tax if you work from home. Depending on how much you use your home for business, you may have to pay business rates rather than council tax. For more information, click here
If you have private equipment (e.g computer, desk, etc) and want to bring them into your business, you will have to find out its market value in order to claim tax relief on it. To do this, you can look on eBay an search for similar items and then include that cost. If you want to use the equipment for personal use as well, you will have to work out the percentage of business use and then include that proportion in your accounts.
If the equipment is bought for business use only, you can claim tax relief on the full cost as a capital asset.
HMRC says that sole traders and partners can’t claim tax relief on business journeys undertaken by bicycle. If you employ anyone, then your employees can claim tax relief on business bicycle travel - but you can’t.
If your dog is a ‘working animal’, such as a farm working dog, a police dog, etc. then they are a capital asset and qualify for capital allowances. This means you can put food, veterinary costs and so on through as a business cost, thus saving you tax.
Unless you are claiming simplified expenses, working from home means you can claim relief on the percentage of your electricity you use for business. Working from an office means that you can claim on the full cost of electricity.
We find that this is a shocker for some people; you cannot claim tax relief for entertaining your clients! You can only claim relief for the entertainment of your payroll employees. And even then, HMRC have provided rules about this: 1) It is an annual event (such as a Christmas party) 2) It is open to all staff, and 3) It costs less than £150 per guest present.
If one of these rules are not met, then it becomes a taxable benefit where the employees would have to pay the tax on that benefit.
Your farm animal is a capital asset if it is part of a ‘production herd’, which is a group of the same species of animals kept for its wool, eggs, milk, etc. while it is still living. Farm animals can also be tax deductible if it is kept as stock.
If your journey was primarily for business, then you can claim the full cost of the flights. If your journey was for both private and business, then you can only claim the costs that you can separate from the personal part of the journey. If unable to separate the two, then you cannot claim any of the costs.
You can only claim relief on food and drink if you have employees – providing meals at a canteen is also allowable as long as it is available to all staff. A self employed person can claim on food if it is out of their normal working hours and they are out on business. HMRC does not define what ‘normal’ working hours are, as this can vary from each person, so when claiming relief on food, be prepared to justify it to a visiting inspector
Food and drink
Unless claiming on simplified expenses, claiming on gas is allowable if working from home, as long as you work out the percentage of how much your home is used for business. Working from an office means you can claim on the full cost.
As a self-employed employer, giving personal gifts to employees means that there is no tax to claim and you don’t have to put it into your accounts.
Gifts to other people can be claimed on, if meeting these rules: 1) the gift is not food, drink, tobacco or vouchers, 2) it costs less than £50 per recipient per year and 3) it is marked with your logo (e.g a mug with your logo printed on it).
If your stay was primarily for business, then you can claim the full cost of the hotel accommodation. If your journey was for both private and business, then you can only claim the costs that you can separate from the personal part of the journey. If unable to separate the two, then you cannot claim any of the costs.
Whether it is insurance for your business, insurance for your office, or a specialist home business policy, you can claim tax relief on the full cost.
Insurance that has a dual purpose however, is not allowable.
Believe it or not, the only medical treatment that can be claimed on is if you are a performer who has cosmetic surgery if they can prove it is only for business. So if you are an actor who needs straighter teeth for an acting role, you can purchase that and claim on it. If you have an accident at work, you cannot claim the cost of medical treatment.
Contributing to your own pension is a personal cost and cannot be claimed on through your business accounts. What you could do is put them into the Tax Reliefs section of the main part of your tax return, the ‘passing into registered pension schemes’ boxes, and then you can claim tax relief if you are a higher rate tax payer.
Mileage, petrol and diesel - If you are using your own car using HMRC’s approved rates. Alternatively, you can claim a business proportion of all of your motor expenses including fuel, insurance, car tax, MOT, service, repairs, etc.
You can usually claim tax relief on the full cost of professional fees, however there are some rules, for example if the fees relate to the purchase of a capital item, such as property.
Unless claiming simplified expenses, you may be able to claim on some of those costs if working from home. If the part of the property that is being repaired only relates to your business, then you can include this in your account in full. If a room needs repairing and you use it 80% of the time for business, then you can claim 80% of that cost. If the entire property needs repairing, such as the roof, and you have 10 rooms in that property, and still only use one room for business 80% of the time, then you can claim 1/10 of 80% on the cost.
If you’re renting your home from a landlord and you work from home, then you can claim a proportion of the rent for your business. If you rent an office that you use just for business, you can claim tax relief on the full cost of that rent. Rent deposit however, goes on your balance sheet and isn’t available for tax relief.
Any protective clothing you wear for work can be claimed. What you can’t claim on is clothes you wear for work that can be considered everyday wear, such as jeans.
If you are paying a professional institute for an annual subscription, you can claim on it as long as the institute gives you the right to use a qualification and you use that qualification in your business. You can also claim tax relief on the cost of subscriptions to trade associations such as your local Chamber of Commerce.
If the stationery you buy is used only for business, then you can claim tax relief on the full cost.
If using your home phone you can claim the full cost for all of your business calls using an itemised bill and a percentage of line rental. If the personal usage of your telephone is, as HMRC puts it, ‘not significant’, then you can claim on the full cost.
If you have a separate phone line for business, you can claim tax relief on all the calls and line rental for this phone.
If the primary reason for your journey is business, you can claim on the full cost of a train ticket. If the reasons for the journey are both personal and business, you can only claim tax relief for the cost that can clearly be separated from the private part of your journey. If this cannot be separated, then you cannot claim tax relief.
HMRC have said that you can only claim tax relief on any training that updates your current expertise. So if the training give you new expertise or skills, you cannot claim tax relief on the costs.
You can only claim tax relief on uniform that clearly identifies what you do, for example, a shirt with your logo on it. You can also claim for the cleaning and maintenance of uniforms.You cannot claim on clothing other than your uniform.
You can claim allowable business expenses for the creation and maintenance of a website.
Every individual circumstance is different and this information is for general advice and should not be relied upon without discussion with a suitably qualified professional.
If using your own car and your sales are under the VAT limit you can include your business mileage in your accounts at HMRC’s approved rates (45p/mile for the first 10,000 miles, and 25p/mile thereafter). If you have two vehicles for business, you get one allowance of 10,000 miles for the vehicles.