If you’re a business owner, it’s essential that you know what’s what when it comes to tax-deductible purchases.
Being clued up as to what does and what does not count as an allowable expense is key to knowing how to accurately prepare your tax return each year. Many business owners struggle to know what counts as a tax-deductible expense, and many are unaware that plenty of their everyday costs are, in fact, tax-deductible.
So, today we thought we would share with you ten purchases that you may not have known were tax-deductible. Without further ado, let’s get into it.
First things first, what are tax-deductible expenses?
Tax-deductible expenses refer to costs that relate to your business on which you can claim tax relief. If you are self-employed you will need to use your self-assessment tax return to claim relief on such expenses.
1. Start-up costs
Starting up your own business brings with it innumerable costs, that’s for sure.
Well, here’s something to pique your interest: did you know that you can claim for relevant costs up to seven years before your business even begins operations?
Yup, that’s right. Any expenses and professional fees that go towards getting your business started are all tax-deductible. Plus, if you use personal funds to cover these costs when you’re starting out, you can claim tax back on these expenses once your business starts trading.
Simply make sure to retain any receipts and keep accurate records of the costs you’re incurring as you go through the start-up process.
Did you know that you can claim back the cost of any training, CPD or seminar attendance if you are self-employed or the director of a limited company?
As long as the training is solely for business purposes, you can likely include it as an expense.
There are, however, some rules that differ between company directors and those who are self-employed. Here at One Two One Accounts, our team can best advise you on whether your training will be tax-deductible or perhaps eligible for a Capital Allowances claim, instead.
3. Utility bills
If you are self-employed and work from home, you’ll be pleased to know that you can claim part of your household bills as tax-deductible expenses.
In order to do so, you must determine what proportion of your home is used for work purposes. So, for example, if your office space accounts for 15% of your household space, you can claim 15% of the costs against tax.
Interest portions of mortgage repayments, broadband/phone costs, utility bills and council tax are all included within this.
4. Office maintenance
If you work from a business premises, rather than from your own home, you can claim tax relief on your rent and on any repairs or maintenance to the premises and your equipment, too.
5. Bank charges
You may not know that you can actually claim relief on a variety of bank charges.
This includes banking fees, overdraft fees and credit card charges, plus interest on bank loans, business loans, hire purchases and leasing payments, too.
It’s important to bear in mind that if you are using cash accounting, you are only eligible to claim back up to £500 in bank charges and interest charges.
Absorbing the costs of professional subscriptions that are related to your business? You can claim for those!
Such subscriptions may include professional membership fees, subscriptions to trade magazines and professional journals, as well as annual subscriptions to approved professional bodies or societies, as long as your membership is relevant to your business.
7. Work clothes
Kerching! Did you know that you can claim back the costs of uniform, protective clothing and even work costumes (if you’re in acting and entertainment, that is!) on your tax return? Well, you do now!
FYI, you can’t claim on everyday clothing, even if you wear it for work!
8. Two-wheel travel
You likely know what you can and cannot claim back when it comes to expenses for a car or work vehicle, but were you aware that you can also claim expenses on your bicycle?
That’s right, repairs, maintenance and insurance are all tax-deductible for business use on a mileage basis.
Bear in mind that you can only claim back a proportion of the costs, depending upon how much you use your bike for purely business-related purposes. As such, it’s essential that you keep track of your mileage and any reasons for travelling.
9. Life insurance
Self-employed persons and directors of limited companies will be eligible to claim back some forms of life insurance as business expenses.
In order to claim life insurance policies as tax-deductible expenses, you must take out the policy through the business rather than as personal cover.
There are some rules that differ depending upon whether you are self-employed or a limited company director. Here at One Two One, we can advise you on what forms of life insurance will be eligible for tax relief depending on your circumstances.
10. Charitable donations
You’ll be pleased to know that donations to a registered charity by a limited company are, of course, an allowable expense, meaning the value of such donations can be deducted from your profits before paying tax.
In order to claim tax relief, you’ll need to retain a record of any donations, showing the date, the amount and which charities you have donated to. If you have donated land, property or shares you must retain any legal documents demonstrating the sale or transfer to the charity.
Our professional accountants can help you with your tax return and ensure you are claiming for all possible expenses. Simply get in touch today to speak to a member of our team.