When running your own business, whether as a limited company or a sole trader, you may be uncertain as to what exactly you can pay for straight from the company. Any expenses that you put through your business will help to reduce your tax (corporation tax if using a limited company, personal tax if working as a sole trader). However, you will need to ensure that you are claiming the right expenses as HMRC will not allow anything and everything to be treated as an expense!
If you remember anything from this blog, make sure you remember the golden rule when claiming business expenses:
An expense can be claimed if it is wholly, exclusively and necessarily for the purpose of the business.
This means that if an expense is both necessary for the running of your business, and is solely going to be used by the business (i.e. not used personally as well), then it is an allowable expense.
The most common expenses that can be claimed
The types of expenditure you can claim for through your limited company is largely dependent on the type of sector you are working in, builders for example are likely to have far more varied expenditure than say a management consultant who mainly works behind a desk all day. Below, we have listed the most common, general business expenses for a service based sole trader/limited company:
• Business travel (subject to the 24 month rule- do check with your accountant that this applies to you)
• Mileage claims of 45 pence per mile for the first 10,000 miles of the year (25 pence thereafter)
• Business insurances such as professional indemnity insurance
• Hotel stays and subsistence for overnight business travel
• Telephone and broadband costs
• Stationery and postage
• Computer, software and printing costs
• Business assets required for your work, such as laptops, cameras, professional equipment
• Professional subscriptions
• An allowance for using your home as your office (the amount claimable differs for sole traders and limited companies)
• Accountancy fees and legal costs
• Uniforms, protective clothing or costumes for actors/entertainers
• Marketing and advertising
• Training courses and seminars
This is not an exhaustive list by far but is a general guide most sole traders and limited companies can use. If you are unsure if you can claim specific items through your business it is always best to run these past your accountant who will be able to give specific advice.
PaperRocket Accounting provide accounting and tax services to professional contractors, freelancers, and small businesses working in the UK.
We offer our clients a flexible choice of fixed fee monthly packages which cover all of their accounting and tax needs (so no hidden costs or surprise bills!). All of our accounting packages include a monthly subscription for a cloud accounting software subscription provided by the awarding winning FreeAgent.
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