EXPENSES • 24 OCTOBER 2022 • 7 MIN READ
What expenses can I claim for my business?
Understand your tax deduction potential
A tax deduction is an amount you deduct from your gross income so the tax you have to pay is lower. It’s sometimes called a tax write-off.
Tax deductions include business expenses such as phone, internet, rent, electricity and more. You are eligible to deduct most of the business-related expenses. To claim tax deductions, you have to consider:
- Were the expenses business-related that were used for income-generated activities?
- Were the expenses already incurred?
- Do you have the records of these expenses such as receipts or bank statements?
If the expense is related to both work and personal use, you can only claim the business portion of it.
The nature of your business is also a factor when it comes to tax deductions. For example, a media production company will be able to claim a Netflix subscription as expenses (they are critical for research), but a construction business won’t.
With that broad understanding, we have a comprehensive list of business expenses for tax deductions.
- Typically deductible
- Sometimes deductible
- Definitely not claimable
- Fixed assets
- International travel
- Rental properties
Typically claimable
- Anything you purchase to sell to clients and/or customers
- Accounting fees
- Business insurance
- Advertising
- Bank fees and credit card charges
- Commission paid to others to sell your products/services
- Software / internet expenses
- Business consultancy fees
- Contractors and subcontractors
- Freight
- Health and safety costs
- Interest on loans and overdrafts taken out for business purposes
- Legal fees – if trade related, ie not relating to setting up your company, the structure of your company, looking into buying another company etc
- Licenses, registrations, and subscriptions
- Office expenses
undefinedundefinedundefinedundefined - Postage
- Printing and stationery
- Protective clothing
- Rent and lease of assets
- Salaries and wages
- Training and courses
- Travel (national and international)
Sometimes claimable
Entertainment
- Gifts (and vouchers) - to staff these are deductible, although a taxable employee benefit may arise depending on the nature and value of the gift. To clients, suppliers and other non-staff these are not deductible.
- Social events – for staff the costs will be deductible, for non-staff the costs will be not deductible. If both staff and non-staff are attending the event then a proportion of the cost (relating to the proportion of non-staff in attendance) will not be deductible.
- Light meals for meetings – if a staff meeting these costs are deductible, if a client meeting these costs are not deductible.
Repairs and maintenance
- Repairing an asset to return to its original state
- Maintaining an asset to ensure its continued operation
- Rectifying general wear and tear
- Cleaning, rubbish disposal
If the transaction increases the asset’s value beyond the initial purchase price, it can’t be claimed as an expense. It’s instead considered to be part of the asset and depreciated.
Assets used in the business
There are special tax deductions available for the purchase of assets, known as capital allowances.
You can find more details on capital allowances on HMRC’s webpage. Often, the majority of the assets you buy for use in your business will be eligible for 100% relief in the year of purchase through the annual investment allowance.
If you intend to purchase a lot of fixed assets it’s worth getting an accountant, who can ensure you’re claiming the correct, and maximum, capital allowances available.
Use of (part of) your home as an office
If you’re a sole trader and you can show there is part of your home used primarily for your business, you can claim a portion of your house-related expenses. These can include:
- Rent
- Mortgage interest
- Electricity
- Rates
- Insurance (home and contents)
- Telecommunication bills
The amount you can claim is dependent on the floor area dedicated to business. For more info, check out our guide on claiming home expenses.
Motor vehicle expenses
- Fuel, servicing, MOT, road tax and insurance can all be recorded as business expenses. That said, you must make an adjustment if the vehicle is available for personal use or being used privately
- You can reimburse employees if they personally pay for any motor vehicle expenses.
- If an employee uses their own vehicle for business, you can reimburse them based on the number of business miles traveled.
- You can provide your employees with a car allowance.
Because adjustments and reimbursements can be difficult to calculate, this is one of the times you consult an accountant. Register Beany for free today!
Expenses paid personally
Perhaps you’ve used personal credit for business expenses like travel or online purchases. All you need to do is make a list and send it to your accountant.
Make sure to keep the invoices. While they might not be necessary for your financial statements, HMRC still requires that they be kept for at least six years.
Got any questions about Beany?
Chat to one of our friendly team today to get clarity.
Definitely not claimable
Many people believe some of the expenses below are business related. But in reality, they aren’t!
- Drawings
- Doctor and medical bills
- Physiotherapy (even if you’re injured at work)
- School fees and childcare costs
- Vet bills
- Shoes and clothing if they are suitable for general wear
- Gym subscriptions
- Personal travel and accommodation
There are also a few business expenses that can’t be claimed for VAT or tax deductions:
- Parking and motor vehicle fines
- Late payment penalties
- Any other fines or penalties
At Beany, we have a team of knowledgeable support specialists to help you with any inquiries.
International travel
You can claim any business expense that’s linked to the production of your business income.
Because your accountant or HMRC could ask for proof that your trip was for business purposes, it’s a great idea to record the following:
- the reasons for the trip
- the date of the trip
- your itinerary
- the cost of car hire, and air, bus and taxi fares
- the cost of accommodation, meals and incidentals
- the time spent on business and non-business activities.
As with any business expense, you should retain copies of invoices or tickets.
If a trip is part business, part pleasure, you simply need to claim the relevant percentage or direct costs of the business part of the trip. For example, if your Fiji trip included a week on the beach and a week of client meetings in Suva, you can claim all of the Suva expenses and half of the travel costs (like the airfare).
Rental properties
Income from residential property rental shouldn’t be declared for VAT, and any costs shouldn’t be claimed for VAT, either.
Deductible costs
Property-related expenses
- Rates
- Insurance
- Property management fees
- Repairs and maintenance
- Travel to and from your property for inspections and repairs
Financing expenses
- Mortgage interest
- Loan fees
- Interest on mortgage
Legal and consulting fees
- Legal action to recover unpaid rent
- Costs for evicting a tenant
- Preparation of a tenancy agreement
- Accountancy fees
- Valuation fee (unless it’s as part of the acquisition or sale of the property)
Non-deductible costs
- Mortgage repayments (except interest)
- Repairs and maintenance, if it increases the value of the asset
- Valuations for the purpose of acquisition or sale
- Stamp duty
- Costs associated with the purchase or sale of the property
The bottom line
To claim the tax deductions, you must keep records of the expenses for 6 years. Besides, you need to use the right method to calculate and reconcile the amounts you claim as well as file and pay HMRC at the right time.
Understanding what’s tax-deductible and knowing the rules applied can reduce your taxable income or taxable profits. It’s also important to keep track of them.
You still can rely on Excel or keep a manual logbook but you might spend more time doing the admins and the possibility of leading to errors are higher. Therefore, opting in for accounting software such as Xero simplifies expense tracking, tax admins, and automatic filing for your taxes.
Wanna move away from these mundane tax admins and never miss a deadline? Beany can handle everything for you. Talk to a Beany accountant today and get started for free!
How Beany can help?
We’re an online accounting firm that is always right here for you, your accounting pain relief. The most advanced technology lets us work way more closely with you than a normal accountant would.
We have a dedicated team of remote accountants to take care of your business no matter where you are, so you can focus on growing your business. We take out the ‘fluff’, break down the barriers and get things done. Looking out for you is what we are all about. Get started for free today.
Sue de Bièvre
Beany Co-Founder
An intrepid entrepreneur and feminist with a penchant for disruption; spotting problems and rolling her sleeves up to fix them makes Sue tick.
subscribe + learn
Beany Resources delivered straight to your inbox.
Beany Resources delivered straight to your inbox.
Share:
Related resources
Home office expenses: a tax deduction guide for business owners
October, 2022Whether you're a business owner, freelancer, or contractor, you could claim home office expenses related to busines...
What motor vehicle expenses can I claim for my business?
October, 2022Everyone tries to make the most of recording their personal vehicle as a business expense while the HMRC is doing t...