What business expenses can I claim?

Blogs 4 Jun 2021

Whether you’re just starting out in business or are getting ready to file your tax return, our tax experts from FSB Tax Investigation Protection explain what business expenses you can claim as a sole trader or limited company.

Business owner calculating expenses with receipts, laptop and calculator

What is a business expense?

From stock and staffing costs to travel and training courses, there are lots of everyday outgoings when you’re running your own business. Understanding the allowable expenses you can claim can help to reduce your tax bill when you file your taxes. Once these expenses have been deducted from your turnover, you’ll pay tax on the remaining amount, which is your taxable profit. You can’t claim expenses if you’re using the £1,000 tax-free trading allowance.

Unlike sole traders, if you’re running a limited company, you need to follow different rules. As a limited company, you can deduct business costs from your profits before tax and then must report any item you use personally as a company benefit.

What is the difference between a business expense and capital allowance?

Capital allowance is an expenditure that you can claim against your taxable profit.  If you buy an asset that you keep for use in your business, such as equipment or business vehicles, you can deduct some or all of the cost of the item from your profits before tax. This is known as plant and machinery and the Government website lists what you can and cannot claim for. Capital allowance also includes research and development (R&D) if you are a limited company. 

What can I claim as a business expense?

Here are some examples of the types of business expenses that you might incur whilst running your business. This list is not exhaustive and as every business is unique, you’ll want to assess your own running costs to decide what might be an allowable expense. You can speak to your accountant or a tax specialist for advice.

Office, property and equipment

  • Stationery, printing, postage, phone bills
  • Computer software you use for less than two years or where you regularly renew the licence
  • Rent for business premises, property insurance, business rates, utility bills

See the full list and exclusions.

Travel costs

  • Fuel
  • Parking
  • Train or bus fares
  • Vehicle insurance
  • Hotel rooms or meals on overnight business trips

See the full list and exclusions.

Clothing

  • Uniforms
  • Required protective clothing
  • Costumes

See the full list and exclusions.

Staff costs

  • Salaries
  • Pensions and employer’s National Insurance Contributions
  • Benefits
  • Training courses

See the full list and exclusions.

Reselling goods

  • Stock
  • Materials
  • Costs from producing goods

See the full list and exclusions.

Legal and financial

  • Accountancy fees
  • Legal or other professional fees for your business
  • Insurance policies for your business
  • Bank, credit card and other financial charges
  • Interest on bank and business loans
  • Bad debts (only if you use traditional accounting)

See the full list and exclusions.

Marketing, entertainment and subscriptions

  • Advertising costs
  • Website costs
  • Trade or professional journals
  • Trade body or professional organisation membership if related to your business

See the full list and exclusions.

Training costs

  • Relevant training courses for your business

See the full list and exclusions.

I use something for both business and personal use. Can I still claim for this?

Allowable expenses only relate to business costs. For example, if you use your phone for work and personal use, you'll only be able to claim for the costs related to your business calls. 

How do I claim a business expense?

Whether it’s parking, printing or relevant professional fees, to claim your allowable expenses you’ll need to:

  • Keep records as proof of your costs, such as invoices and receipts
  • Add up the total for the tax year
  • Include this amount in tax return

Business life is busy, so make sure you stay on top of your records throughout the tax year. This will make the process easier. You won’t be asked to send proof when you file your tax return, but you must keep records as HMRC can ask to see these during an HMRC enquiry.

More questions?

FSB members can get in touch with our team of tax specialists for advice and guidance.  It’s important to seek advice when completing your return to clarify any areas of doubt and to ensure that your submitted return is complete and correct. 


 

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