Automated Accountancy

Expenses to claim on your personal tax return

Many sole traders run their businesses from their home, meaning they can only claim tax back on the proportion of those expenses that relate to the space you use for your business, including heating, electricity, council tax and mortgage interest.

You’ll need to find a realistic way of dividing the costs. You may be able to divide your bills according to the number of rooms you use for your business, or the amount of time you spend working from home.

As well as the usual paper, envelopes and pens you can also claim back tax on postage and printing, including the costs of printer ink and cartridges that you use as part of your business.

With more businesses now trading online, this allowance also applies to electronic communications – so you can claim tax back on your business phone, mobile and internet bills too.

If you use your phone, mobile and internet for both personal and business use, you’ll need to demonstrate a realistic way of dividing the costs and can only claim tax back on the part that’s for business use.

You can also claim tax back on computer software that your business uses for less than two years, or if you make regular payments to renew your licence to use it.

If you get advice from an accountant, lawyer or other professional as part of your business, then you can claim tax back on their fees.

You can claim allowable expenses for hiring surveyors and architects for your business too, but not for personal home improvements.

If you have a business bank account, you can claim tax relief on bank, overdraft and credit card charges, or on interest on business loans.

You can also claim tax back on hire purchase, lease or other forms of financial payments for equipment that you use in your business.

You can claim tax relief on employee and staff salaries, bonuses, pensions, benefits staff and employee costs, agency fees, subcontractors, and employer’s National Insurance contributions.

There’s a whole host of allowable expenses you can claim for if you have to travel for business, including train, bus, taxi, air fares and accommodation costs.

But these only apply if the primary reason for your journey or stay was for business.

If you take a trip that combines business and pleasure, you can only claim tax relief on costs that you can show are separate from the private part of your journey. If you can’t split up the costs, you can’t claim tax relief on any part.

If you use a vehicle as part of your business, you can claim tax relief on:

  • Vehicle insurance
  • Repairs and servicing
  • Fuel
  • Parking
  • Breakdown cover
  • Hire charges
  • Vehicle licence fees

Again, tax relief only applies to these if they are business, rather than private expenses.

You can’t claim tax back on parking fines or other fines incurred when you’re driving. There’s no tax relief for breaking the law.

You can claim tax back on:

  • Items that you resell, e.g. stock
  • Raw materials that you use to make goods for sale
  • Direct costs from producing goods

You can claim tax back on the costs of advertising and marketing your business. As well as traditional print marketing, that can include costs for hosting and maintaining your company website.

But beware, you may think that treating a customer or supplier to lunch is ‘marketing’, but HMRC considers it as ‘entertaining’ which you can’t claim tax back for.

If you’re a member of a professional trade body or organisation as part of your business, you can claim tax relief on your membership fees. Subscriptions to trade or professional journals are also allowable expenses, so claim for those too.

Clothing and uniforms

There’s a couple of elements to this. Let’s say you want people in your business to wear a uniform to help get your brand out there, which could be shirts, jackets, trousers, shoes, hats etc.

Well, when you buy this clothing it will be a tax-deductible cost in the business. The key thing here to stop it becoming an alternative form or payment to your employees in HMRC’s eyes is to have your logo on it.

It this logo wasn’t on it then HMRC would see the purchase of these clothing items as you’re giving your team an alternative for or wage or salary, and so HMRC need to be notified.

However, having the logo on the items mean it doesn’t fall into this category.

The other thing to be aware of is if you require your team to clean the clothing items themselves. They could apply to HMRC for a tax refund for the last 4 years if they have never claimed this, as well as an adjustment to their tax code so that they save a little income tax.

There’s a whole host of flat rate allowances out there to claim, and too many people just aren’t aware of them. Check out gov.uk to get more detail.

From a business point of it will save on Income Tax or Corporation Tax for the clothing purchased.

From the team members point of view, they will save the Income Tax on the flat rate allowance applicable to them on the link above.Further information can be found here: gov.uk

Mileage allowance

You may have heard, or even worked for businesses that reimburse you for using your own vehicle to travel to and from business events, such as meetings, training sessions and industry events.

This is a way of reimbursing the employee or business owner for the fuel as well as the wear and tear of the vehicle.

Many businesses choose to use the Governments pre-approved mileage rates, but they can set their own.

The reason businesses choose the Governments set rates is because it is the most you can provide your employee per mile without the employee paying any Income Tax or National Insurance on it, as well as the business not needing to pay any Employers National Insurance on it either.

If a business wanted to pay more that the approved Government rate, then the excess over the approved rate would be deemed to be taxable.

Further information can be found here: gov.uk