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Tips

Business Expenses – What can I claim?

Wondering what you can claim as a business expense? As you’re probably aware, whether you’re thinking of starting a business or you already run one, you can claim some of your costs as business expenses. As business expenses aren’t taxed, this is a great way to reduce your tax bill and save you money.

The kinds of business expenses you can claim depends on whether you’re a sole trader or a limited company.

What business expenses can I claim as a sole trader?

As a sole trader, you can claim back any expenses you’ve incurred from your business. HMRC states that you may claim for expenses which are “wholly and exclusively” incurred in the running of your business.

If you incur an expense for both personal and business use, you’re allowed to claim only the proportion of the expense that relates to your business. For example, if your monthly mobile phone bill is £40 but you only use your phone 50% of the time for business use, you’d claim £20 as an expense.

What expenses can I claim as a sole trader?

These are some of the business expenses you can claim as a sole trader:

  • Accountancy fees
  • Accommodation expenses during business travel
  • Business mileage
  • Fixed assets such as equipment and office furnishings
  • General office purchases
  • Professional subscriptions
  • Telephone and broadband expenses
  • Training expenses
  • Use of your home as an office

What business expenses can I claim as a limited company?

If you’re running a limited company, knowing how to claim business expenses is an effective way to keep your business tax efficient and reduce your Corporation Tax payments. HMRC allows you to claim expenses which are “wholly and exclusively” for your business.

HMRC will also take into account the ‘fairness’ and ‘reasonableness’ of the expenses claimed.

These are some of the expenses you can claim as a limited company:

  • Accountancy fees
  • Accommodation expenses on business travel
  • Business mileage
  • Car, van and travel expenses
  • Charitable donations from your company
  • Christmas party and other staff events
  • Equipment expenses
  • Fees and expenses incurred in forming your company
  • Fixed assets and disposals of fixed assets
  • General office purchases
  • Gifts and trivial benefits for employees
  • Pension payments
  • Professional payments
  • Salaries
  • Telephone and broadband expenses
  • Training expenses
  • Use of your home as an office

How to keep track of your business expenses

Whether you’re a sole trader or running a limited company, keeping an accurate record of your business expenses throughout the tax year is essential.

For example, if you’re claiming business mileage as an expense, HMRC requires a breakdown of each of your journeys with the mileage covered. A good way to approach this is to record all your business mileage on a spreadsheet and update it with each trip. If you’re claiming tax relief for fuel when driving a company car, you need to save all your receipts.

In general, the cost of everything that you require in the course of your business is eligible for tax relief. The expenses must be reasonable – for example, HMRC tends to view the frivolous use of taxis as excessive. Receipts must be kept for six years after you’ve filed your returns as HMRC may ask you to produce them.

Want some more advice on what you can claim as a business expense? Give our accounting team at Hammonds Accountants a call on 020 8249 6328 or drop us a line at . We’ll be happy to help you minimise your tax bill.