Whether you have only just started your own business or have been trading for years, it can be difficult to know exactly what you can and can’t claim as business expenses. To help, we have put together a list of the expenses that most commonly cause confusion.
Fuel vs Mileage
If you own a business vehicle, then you will be able to claim any fuel, repairs or insurances for that vehicle. However, if you just use a personal vehicle for business travel then you won’t be able to claim any of these.
Instead you can claim a mileage allowance for any business travel. This is calculated as 45p per mile for the first 10,000 miles, after which it is 25p per mile. It’s also worth noting that if you ride a bicycle to work, you can claim 20p per mile!
If you purchase a new van for work, then you are able to claim this as a business vehicle. However, if you buy a car, then it generally isn’t worth putting through the business due to the high taxes that can result in the form of company car tax.
It won’t matter whether you finance or lease your new vehicle, it will just be a question of whether you want the tax benefit immediately or spread out. This article explains more about leasing and financing.
You are only able to claim meals when you are working away from your normal place of work. You will also need to be a reasonable distance away from your hometown. Generally, a 25 mile radius is a good rule to base this on.
If you are self-employed, then you will only be able to claim part of your mobile bill. Do this by splitting your monthly mobile cost by the percentage of business use. If you have a limited company, then providing that the contract is in your company’s name, you can claim the full cost with no Benefit in Kind being incurred (i.e. not personal tax liability).
Use of Home
If you occasionally work from home or do not have business premises, you can claim an allowance towards the electricity, internet, water and so on that you use. The basic rates set out by HMRC are as follows:
- 25 – 50 hours worked at home each month: you can claim £10 per month
- 51 -100 hours worked at home each month: £18 per month
- 101+ hours worked at home each month: £26 per month
You can claim these amounts without having to provide paperwork for it. However, if this doesn’t cover what you use, you can calculate more exactly what you can claim by using a Use of Home calculator like this one – Use of Home Calculator
Client entertaining is not deductible for tax purposes and needs to be clearly identified. However, entertaining staff is allowable, up to £150 per staff member each year. It is an all or nothing claim though so spend £160 per person on a party and its not allowable without being taxable on the employee.
If you are self-employed, then you will not be able to claim any healthcare costs. As a limited company you can claim healthcare but there is likely benefit in kind tax due on this.
As a self-employed person there will only be a taxable benefit if you are a higher rate tax payer. If you have a limited company, then it is normally best from a tax perspective to make employer contributions. You should speak to a financial advisor though about your specific circumstances.
You will only be able to claim training costs if you are expanding an existing skill for yourself or developing any skill for your employees.
This is only allowable if the item of clothing has your company’s logo on it or if it is protective, for example a HI-VIZ jacket or steel toe capped boots.
Hopefully this list has helped you better understand what you can and cannot claim as business expenses. However, if you are a Limited Company and have a more complex query, then you can use this link to book a tax clinic with a qualified accountant. Even if you are not a client, you can use this free 15 minute telephone call and we will do our best to find a solution for you.