Claiming expenses on your outgoings is a great ‘perk’ (we’ll come back to that) of owning a business. It means that, thanks to being able to claw some money back, expenditure is not as high as it otherwise would have been, which can be the difference between a profit and a loss, a successful business and a failing one. Plus, of course, your tax bill is less when you can claim expenses back.
But what is it you can claim for exactly? It’s not everything, so beware; don’t assume your outgoings (and therefore your tax bill) is going to be lower than it really will be just because you thought you could claim for things that you can’t.
One of the main expenses that can be claimed for is to do with cars (but not company cars, that’s a different matter). You can claim money back on the mileage that you do for business purposes. Currently, the brackets are 45p per mile for the first 10,000 miles, and then 25p per mile for anything after that. But did you know that you can claim for bike travel too? It’s 20p per mile! That’s because it is an environmentally friendly way to travel.
You can also claim for office consumables such as printer ink, paper, and other stationery. Don’t forget to speak to you accountant about ways to ensure you – and the company – make the most out of your allowances. For example, you could personally own a laptop, but if your company were to buy it from you (and you could still use it), you would get a tax free lump sum, and your company would be able to put the money through as an expense, since the laptop would become a company asset. Everyone wins, and it’s all perfectly above board!
So many people these days are finding that working from home is a cost effective way to do business, and it helps with the famous (or perhaps infamous) work life balance. If you do work from home you can put claims in for your rent, mortgage, and utility bills. There are limitations to this, and it is best to discuss your ideas with your accountant before you begin. For example, the amount you can claim works on a percentage of the amount of space you use for the business. If you use just one room, you can claim less than if you use a whole floor and the garage for storage. But you will be able to claim even less if you use some of that space as a living area too (such as having a desk in the corner of a bedroom which is also used for sleeping in). It can get complicated, however, for the most part it is a great way of saving money.
If you aren’t sure about what you can or can’t claim for, it’s best to schedule an appointment with your accountant. They will be able to go through everything that you can claim for, and in this way your tax bill can be reduced, sometimes dramatically. But nothing can be done without proof, so make sure you keep your invoices and receipts (and keep them for the long term since HMRC can do an audit at any time, and records must be available for up to 6 years after the initial purchase).