Have you ever wondered what expenses your limited company in the UK can claim to reduce the amount of corporation tax you have to pay? Navigating the allowable business expenses can feel a little complicated at first, but understanding what your company can claim can result in significant savings. By keeping track of your expenses and knowing which ones are deductible, you can positively impact your company’s bottom line.
Understanding allowable limited company business expenses is crucial for ensuring you make the most of any tax relief available to your company while staying compliant with HMRC regulations. Let’s dive into the details of 12 allowable business expenses that are particularly relevant for limited companies in the UK.
Office Costs
The costs associated with running your office can quickly add up, but the good news is that many of these expenses are deductible. This includes costs such as your rent, utility bills, and office supplies. If you’re working from home, you can also claim a portion of your home expenses like heating and electricity. Always keep accurate records and receipts, as this will be necessary if HMRC requests evidence for your claims.
Rent and Utilities
If your limited company operates from an office space that you rent, you’re allowed to claim the rental costs as an allowable expense. Similarly, utilities such as electricity, water, and gas used in your business operations can be claimed. Remember, these costs should be directly related to your business activities.
Office Supplies
Everyday items such as paper, pens, and postage stamps fall under office supplies. As long as these items are necessary for your company’s operations, they can be deducted as a business expense.
Working from Home Expenses
If you work from home regularly, there are specific amounts you can claim without needing receipts, under HMRC’s simplified expenses system, or you can claim a reasonable proportion of your actual household expenses.
Travel and Accommodation
Travel is often necessary for business activities, and fortunately, many travel-related expenses are tax-deductible. It’s crucial to keep accurate records, as travel expenses can be closely scrutinised by HMRC.
Business Travel
You can claim expenses for business trips, including travel by train, bus, plane, or even taxi fares. However, these should exclusively be for business purposes; personal travel isn’t claimable.
Accommodation
When business trips require overnight stays, the costs of accommodation are allowable limited company business expenses. Whether you choose a hotel, bed and breakfast, or another form of lodging, ensure the expense is reasonable and justifiable.
Subsistence Costs
Meals and refreshments bought during business trips are allowable limited company business expenses under subsistence expenses. There are reasonable limits to what you can claim, so excessive lavishness could be disallowed.
Vehicle Expenses
If you use a vehicle for business purposes, there are a couple of ways you can claim back expenses. The two main methods are claiming for the actual costs incurred or using the mileage allowance.
Mileage
HMRC offers a mileage allowance, which enables you to claim per mile driven. The rate is currently 45p per mile for the first 10,000 miles in a year, followed by 25p per mile thereafter. This method simplifies the process as it doesn’t require tracking every individual car-related expense.
Actual Costs
Alternatively, you can keep detailed records of all vehicle-related costs (like fuel, maintenance, insurance, etc.) and claim the portion used for business. This method can be more cumbersome but might result in higher deductions if your vehicle usage is predominantly for business.
Equipment and Technology
Investments in essential equipment and technology purchases for your business can be claimed as allowable limited company business expenses. This includes computing devices, software, and office furnishings.
Computing and Office Equipment
You can claim expenditures on items such as computers, printers, and other technological devices necessary for work. Office furniture also falls in this category, including desks and chairs.
Software Licenses
Spending on software and licenses that support your business are also claimable. Whether it’s accounting software or design tools, as long as they are directly involved in producing income for the company, they are valid expenses.
Professional Fees
Professional fees often form a substantial part of business expenses. This includes accounts, legal services, and any other professional services that are necessary for running your company.
Accountancy Fees
Accountancy fees for preparing company accounts, representing your company in tax matters, and any other practice connected to managing the financial aspects of your business are allowable expenses.
Legal Fees
Legal fees, when they pertain to business operations, are deductible. This might include the cost of drafting contracts, trademarking, or other necessary legal services.
Training and Development
Investing in skill development and knowledge enhancement is vital for business growth. Fortunately, training costs that are directly related to the business can be claimed as allowable limited company business expenses .
Employee Training
The cost of training that helps your employees improve their skills and directly benefit your business can be deducted as allowable business expenses . This covers course fees, materials, and sometimes even related travel.
Personal Development
If you, as the director, are enhancing your skills that will directly influence the company’s growth, then such costs can also be claimed, given they pertain to your business role.
Advertising and Marketing
Any spend on getting the word out about your business or generating sales counts towards allowable expenses. This includes online marketing, print ads, and even networking.
Online and Print Advertising
Costs for digital marketing campaigns, social media ads, and traditional print advertising can be claimed. These should be directly linked to promoting your business or driving sales.
Networking Costs
Attendances at trade shows, business seminars, or industry conferences are seen as legitimate networking expenses. This covers the costs of tickets as well as travel and accommodation if relevant.
Insurance
Insurance is a wireframe of protection for your business, and premiums paid on necessary business insurance policies are allowable expenses.
Business Insurance Policies
Policies like public liability insurance, professional indemnity insurance, and employer’s liability insurance can be claimed as these are required to safeguard business operations.
Health Insurance
While personal health insurance isn’t claimable, employee health insurance can sometimes be considered an allowable expense, particularly if it’s part of a benefits package.
Bank and Financial Charges
Bank fees related closely to your business accounts and financial transactions can be deducted. These are often small but nonetheless, permissible.
Bank Fees
Charges like overdraft fees, service charges, and transaction fees from your business bank account can be claimed. However, costs related to personal accounts cannot be.
Loan Interest
Interest payments on loans taken out for business purposes are claimable expenses. Ensure these loans are strictly for business purposes and keep comprehensive records.
Repairs and Maintenance
Repairs related to your business assets are allowable. This includes maintaining property, machinery, or technology that’s been damaged.
Property Maintenance
Costs for maintaining or repairing business premises can be deducted. However, the expense should be limited to repairs, not improvements.
Equipment Repairs
Repairing essential business equipment qualifies as a deductible expense, ensuring your operations run smoothly without unexpected costs eating into your profits.
Salaries and Wages
One of your major expenses as a company is often the payroll. This includes the salaries of both yourself as the director and any employees you might have.
Employee Salaries
All salaries you pay to employees for the work done for the company are allowable expenses. This naturally includes bonuses and overtime payments if applicable.
Employer’s NICs
Employer’s National Insurance Contributions (NICs) are also a permissible claim. These are additional costs above the wages paid directly to employees.
Entertainment
Entertainment of clients and potential clients can occasionally be claimed, but be aware there’s a strict guideline on what counts as entertainment.
Client Entertainment
While entertaining clients is part of building business relationships, these costs aren’t deductible for tax purposes. However, keeping track of these expenses is important for accurate company accounts.
Staff Entertainment
Costs for staff events such as Christmas parties are allowable, under certain conditions, provided they benefit all employees and cost under a set limit per head.
Conclusion
Navigating the labyrinth of allowable business expenses in the UK requires diligence, precise record-keeping, and an awareness of HMRC’s guidelines. By thoroughly understanding these 12 categories, you can more confidently track, claim, and optimize your company’s finances. Your business can benefit significantly by reducing taxable profits and ensuring a healthier financial state. Be sure to maintain thorough documentation of all your expenses and consult with an accountant if you’re ever uncertain about what you can claim. Through smart management of your expenses, you can propel your business forward with robust financial health.
