Neil Askew, January 2014
|Courtesy of Patpitchaya / FreeDigitalPhotos.net|
If you run a business you can claim expenses on some of your costs. This is a great way to help businesses and give them a greater chance of success. Businesses pay tax on their profits. Therefore when owners/directors claim expenses, that amount is removed and therefore they pay tax on a much lower amount. If you are smart you can end up saving yourself a lot of money. So, what can you claim as expenses?
The most common items
If you’re using a car for business purposes you can claim mileage. When travelling by car or van you can claim 45p a mile for your first 10,000 miles and then 25p for each one after that. If you are using a motorcycle it’s 24p a mile no matter how many you go. If you care about the environment, you can claim for bike travel at a rate of 20p a mile.
Other well-known expenses that you can claim include office equipment and consumables (e.g printer inks) that are essential to the running of your company. If you have a limited company, there is a way to claim on some more equipment. If you have a laptop, you can purchase it through the company. That will make it a company asset and it’s cost will be claimable expense. On top of that, you’ll get money straight from the company personally tax free.
Claim for using your home as an office or workshop
If you happen to work from home, you can also claim on rent, mortgage and bills too by charging some of the costs through your company. However, there are some limitations. The amount of rent you can claim is all based on the space dedicated to actual business. For example, if you have an office you only use for business which takes up 10 per cent of the square footage of you flat, you can claim 10 per cent of your rent as expenses. If you work in a room for half the time and use it as a normal room the other half of the time, you’d only be able to claim 5 per cent of the rent back.
For other household bills, these work in a similar way and need to be divided between those used when doing business and those dedicated for non-work use. This is a bit more complicated to figure out and it might be worth looking into having a dedicated business internet and phone service instead.
Another useful area for potential savings is capital allowances. This includes things like machinery, gifts of equipment to charity and even fixtures. You can’t claim for the expenses on some of these things and so instead you must claim for a capital allowance. It can be quite a complicated area though.
There are plenty of other things that you can claim expenses for and HMRC has a full list. Click here. Whatever you claim as expenses, obviously you’re going to need proof of these expenditures. Make sure you keep copies of all your invoices, receipts and bills and store them somewhere safe. It is important because HMRC can come back and request proof of expenses up to six years after they’re claimed. So, if you are thinking about disposing of your papers after HMRC have accepted your accounts, beware. If you are unable to provide proof when asked by HMRC later, you could be asked to pay the money back.
The best way to ensure you claim for everything and remain within the regulations, be sure to give me a call or drop me an email.
Contact Neil for more details. Click Here