Well that's a mouthful in itself isn't it!
A question that we get asked a lot (and rightly so!) is 'what expenses can I claim?'. And by that, people essentially mean which purchases are allowable business expenses in the eyes of HMRC?
The reason this is important is that personal tax and corporation tax is calculated on profit.
Profit = Income - Expenses
Profit is therefore reduced by allowable business expenses, therefore reducing tax.
But remember, as tempting as it sounds to start tapping in your card number left, right and centre - too many expenses can impact cash flow, so make sure you are spending wisely.
Allowable expenses can be a bit of a minefield - and a complete list of allowable businesses expenses across all industries is almost impossible to put together as there are so many options and nuances. This guide is designed to highlight some of the most common allowable expenses for small businesses for the tax year 2023/24.
The small print - please always consult the HMRC website or your accountant/bookkeeper for more information on your specific circumstances. And remember, for any expenses that you are putting through your business you need to be confident that you can justify that it’s a reasonable expense for business purposes and keep all related records and receipts.
Right now that's out the way, lets gooooo...
Mileage
Unless your car/van has been purchased via your Ltd Co, you must expense the mileage not the fuel. This is currently 45p per mile for the first 10,000 miles, and 25p per mile after this.
Note - you cannot claim mileage between home and your usual place of work.
Travel
If you are travelling for business purposes, expenses such as flights, hotels, train fare, parking etc are allowable.
In addition, you can put through reasonable expenses for food and drink when working away from your usual place of work.
Note - you can pay for a client’s meal on your business account, however this is not allowable for tax purposes and will be excluded from corporation tax calculations
Training
Training costs to enhance your existing skills / trade or to keep up to date with your industry is an allowable expense.
Any training to help you expand into an area of business that you don’t currently do is not allowable.
Charity Contributions
If you are a UK Limited Company, you can make charitable donations to UK registered charities in the Company’s name and HMRC will treat this as an allowable expense.
Legal / Professional Expenses
The good news is that all of those not-so-fun essentials are allowable expenses - think accountancy, insurance, ICO, contract writing/templates, professional body memberships.
Office / Co-work Space
Whether it’s rent for your own office space or a co-work membership, this is an allowable expense as long as it’s used exclusively for work purposes.
Claiming for a gym membership because you use the cafe to take meetings is unfortunately not allowed.
Uniform and Protective Clothing
HMRC allow uniform (ie branded) and protective clothing needed to do your job.
You cannot claim for ‘normal’ clothes that can be worn outside of work, even if you have bought them specifically for work purposes.
Software, Apps and Subscriptions
Costs associated with the marketing and promotion of your business are ysyally allowable - think domain hosting, website hosting (including costs to design and build the site), email hosting, social media ads, e-sign software, design software etc
Mobile Phone
This one can differ depending on what company type you are:
Limited Companies - HMRC allow the full costs of the phone and monthly bills, providing the mobile phone contract is held in the name of the limited company and the payments are made directly from the business bank account.
Sole Traders - 100% of the cost can be claimed as a business expense if it’s a dedicated business phone, if not can claim a proportion of the costs in relation to the amount of business use.
Computer Equipment
Any equipment that you need to run your business is an allowable expense e.g. laptop, monitor, mouse, keyboard, microphone.
Trivial Benefits
If you are a Ltd Co, you are allowed 6 transactions, each up to the value of £50 (not a penny more) to spend on small, non-performance related, non-cash gifts or perks
Where there any there that surprised you? We'd love to hear your thoughts!
Please remember this is not an exhaustive list, this is designed to get you thinking about your purchases and what you might be able to claim (and what you can't claim) as an allowable expense.
Any questions, give me a shout on claire@wearethreesixnine.co.uk
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