Many sole traders and small business owners are unsure of quite what they can and can’t claim against tax as an allowable expense. Especially in the early stages of running a business, it can be difficult to work out which things qualify and which don’t. Tax relief can be claimed on a number of different expenses, and most costs that go into the running of a business.
Travel, Mileage and Fuel
Most of the expenses that go into business-related travel can be claimed against tax. This includes travel between business sites or to client sites as well as business trips or journeys to meetings at an external venue. This can be applied to mileage or fuel costs in a company vehicle or in your own car, as well as to public transport expenses. However, your regular commute between your home and workplace does not qualify as tax-deductible.
On trips that require “subsistence” – overnight or food expenses that would not have otherwise been required – you may also be able to claim relief for these expenses.
Tools, Equipment and Clothing
Physical objects that are needed for your business can also usually be claimed as allowable expenses. In its most straightforward form, this covers smaller or lower-cost items. This might include tools and office supplies such as pens and paper, for example. Higher-cost items that are expected to last for at least three years, such as furniture or IT equipment, might need to be claimed as capital allowances instead. This gives you a lower level of tax relief over a certain number of years.
You may also be able to claim for clothing, but only if it is specialist clothing that is exclusively purposed for work. For example, you cannot claim tax relief for a suit even if you do need to wear one for work. If, on the other hand, your work requires more specialist apparel such as protective clothing, this can usually be claimed as an allowable expense and benefit from tax relief.
Office or Household Expenses
The expenses of running an office or business premises are generally eligible for tax relief. This will generally include the cost of utilities and services supplied to the premises such as electricity, heating, telephone and internet. The cost of renting a business site will likely also be eligible, but if you purchase your premises this will instead be capital expenditure.
If you are a sole trader or very small business working from a home office, then some of your household expenses will be allowable in the same way. Chiefly, this refers to bills. However, you will not be able to offset the total cost as this includes personal usage. Instead, a proportion of your bills will be eligible for tax relief, based on the estimated percentage of usage that is for business purposes.