Running your own business involves a lot of administrative organisation. And, in amongst all the other registering and reporting regulations, there’s your annual self assessment tax return. No one escapes. If you’re a sole trader, limited company director, LLP partner or shareholder, you have to submit a self assessment tax return. Even if you’re not earning enough to pay any income tax.
But HMRC have written in a certain amount of balance to their rules. Most of the costs of your business are included as expenses and can save you a substantial amount on your tax bill. The only thing is, you need to know what they are in order to claim them on your tax return.
Here’s a checklist of 13 business expenses that you might be missing out on:
- Tools
This includes any tools or equipment that you use for work. Those in the construction industry are usually very well aware of this option, as you spend a lot of your own money on tools. But it applies to all industries, so it’s worth considering even if you don’t buy your work tools from Snap On or MAC tools. Stick your basic numbers into our Tools Tax Rebate Calculator to get a realistic estimate of what your claim could be worth.
- Mileage & travel costs
HMRC establish Approved Mileage Allowance Payments (AMAP) which you can claim if you drive a van or car to get to work at a temporary workplace. It does not apply to a daily commute to your regular place of work. The current rates are 45p per mile for your first 10,000 miles and 25p for every mile after that. The rate for motorbikes is 24p per mile. Other expenses connected to your vehicle are also allowable, like parking, fuel, breakdown cover, insurance, servicing, licence and repairs.
If you travel by public transport, those expenses are also allowable, like bus and train fares, taxis and plane tickets. There are also ‘subsistence’ costs defined by HMRC for times when you have to work away from home. On top of your travel, you can also claim for ‘reasonable’ food, beverages and accommodation.
- Subscriptions to trade journals, professional bodies and Trade Unions
Organisations can negotiate an agreement with HMRC which allows their members to reclaim the tax relief on all or part of their membership fees. Each professional body and Trade Union has its own deal, so you need to check with the ones you belong to.
- Hiring other professionals
The costs of hiring other professionals to help you in aspects of your business are also allowable. This includes accountants, tax professionals, surveyors and solicitors, amongst many others.
- Professional indemnity insurance premiums and other banking expenses
There is a list of insurance and banking expenses that are allowable for tax relief, including: business and bank loans, credit card, bank and overdraft charges, different finance payments (eg: Islamic finance) leasing costs and interest on hire purchases. Just bear in mind that you can only claim up to £500 of bank and interest charges as part of your self assessment tax return, if you are following cash basis accounting.
- Uniform and protective clothing
You can claim for work uniform and protective clothing that is necessary to do your job. If you wear your own, non-branded clothes to work, they will probably not be included. You can also claim an annual flat rate expenses for the cost of washing your work clothes.
- Staff
If you employ contractors, permanent staff or even seasonal staff, most of the costs involved are allowable for tax relief. These include, but are not limited to: employer’s National Insurance Contributions, salaries, benefits, agency costs, pensions and bonuses. Unfortunately, the cost of an employed childminder or nanny is not covered by the regulations.
- Working from home
You can claim £4 per week for working from home expenses, without needing to collect and collate evidence. That’s £208 per year, just for knowing you can include it on you self assessment form.
- Office necessities
You are entitled to claim the proportion of the cost of your home computer, laptop and tablet that you use for work purposes. In other words, if you use your laptop 60% for business and 40% for family stuff, then you can only claim for the 60%. Buying high ticket items like electronics, may take you into Capital Allowances territory, depending on price.
Other office supplies can be included in your claim. Such as: business stationary, postage, mobile phone, desk phone, printer, ink, printing and software. This is not an exhaustive list, just some of the things people don’t necessarily know are tax deductible.
- Marketing
This is all about cementing those relationships with your clients and is slightly trickier to navigate. You can’t claim for entertaining suppliers or clients. But you can claim for things like producing free samples, mailshots, paid-for ads in directories or newspapers and, very importantly, hosting and maintaining your website.
- Unpaid debts
Using traditional accounting, you are allowed to include unrecoverable debt from clients. This means any unpaid invoices included in your turnover that you are sure won’t be settled in the future.
This does not apply if you are using cash basis accounting on your self assessment form because this only calculates already received income. You cannot include unpaid debts that are for machinery, property or land (fixed assets) or that aren’t part of your turnover figures. If you don’t show accurate calculations, these amounts will also not be applicable.
- Council tax, mortgage and utilities
Working from home means that you can include a proportionate amount of your council tax bill, mortgage, energy bills, rent, broadband and phone. You get tax relief on a percentage of the amount that relates to your home’s business use. For example, if your office is one of the rooms in a four room home you can claim 25% of your council tax and energy bills. As the room is 25% of the entire property. All these little calculations are a bit fiddly, but worth it when you add them all up.
- Donations to charity
Charity tax relief rules apply to individual taxpayers, sole traders and partnerships but not limited companies. All charitable donations are completely tax free and you need to include them on your self assessment tax return. There are different ways to donate; in your will, through Gift Aid, through a Payroll Giving scheme (straight out of your salary) or using property, land or shares. Each has their own set of rules that you need to apply accordingly.
What do I need to do to make all these tax relief claims?
You need to keep as much evidence as you can. When you submit a tax relief claim, you don’t send in all the evidence with it. And HMRC may not want to see your proof. But if they do, it is absolutely essential that everything is ship shape. That means, keep receipts, finance agreements, bills, travel log and invoices from other professionals. Basically, whatever you spend on your business, keep the proof of that expense. We can help you work out proportionality, validity and which rules apply to what area.
