Updated: Apr 5
New business owners and start-ups often ask us what expenses they can and can't claim for in their accounts. Here is a handy guide to help you with an in-depth guide of all the different expenses that are and are not allowed. Happy reading! Looking for a specific cost? Just hit CTRL&F (Windows) or Cmd&F (Mac) and type in your search term to find it quickly in the guide.
Accountancy, Legal and Professional Fees
You can claim all these fees so long as they are solely related to your business. You cannot use your business to pay for your personal Tax return.
Advertising and Marketing
All advertising and marketing costs can be claimed by your business, these include leaflets, business cards, any literature you have printed, trade shows and any Networking costs you incur.
If you have a customer who is not paying you or has stopped trading while owing you money, you can include this loss as an irrecoverable debt.
Bank fees and interest, credit card fees, PayPal Fees, loan interest
Again all can be claimed if they relate to your business bank account, if you use your personal bank account these fees cannot be claimed. The loan interest is allowable but not the loan repayment amount
Before you set up your Company Expenses
Expenses you incurred before you started trading and to get the Company set up are allowable costs and can be claimed in your first year of trading. These costs can go back 7 years.
Business use of home
If you work from home, you can claim a % of your costs for, electricity, water, mortgage interest, gas, council tax or rent and insurance. The claim is based on the number of rooms you use for the business compared to the number of rooms in the property and how many hours you work from home.
Cars / Vans
If you purchase your car / Van through your business it will not be classed as an expense but will be Capitalised and known as an Asset. You claim Capital allowances based on the vehicle CO2 emissions. With a Company vehicle, you can claim the fuel and all costs associated with the running of the vehicle. Insurance, Repairs etc
Generally, clothing is not an allowed expense however, if you provide uniforms for the staff to wear then these would be deductible. As well as protective clothing if needed for your work.
Computer Equipment- Furniture
These are allowable expenditures but will not be classed as an expense but as an Asset. Instead, you will claim a Capital Allowance for the cost.
These are not allowable expenses but are taken by the shareholders from distributable profits after Corporation Tax has been calculated.
You can get tax relief on Charitable donations
Gifts to customers and suppliers are an allowable expense if they are prominently marked with your business name or logo and cost less than £50
Insurance for protecting your business can be claimed but be careful with Medical Insurance as depending on the type of policy can be a benefit in kind to your employees.
If you use your own transport for business journeys then you can claim a mileage allowance, this covers the cost of wear and tear, fuel and running costs. A business journey could be visiting a client/supplier, going to the bank, going to meetings etc. It is important to keep a mileage log and there are a few apps that you can use to do this for you.
The rates are as follows:
Car 0.45p per mile first 10,000 miles, thereafter 25p a mile
A passenger in a car 5p per mile
Motorcycles 25p per mile, Bicycles 20p per mile
Parking fines / Speeding tickets.
These are not allowable.
Any postage incurred in the running of your business can be claimed. Posting paperwork to clients, sending out products etc.
These can be claimed so long as they are on the HMRC list and are paid directly to the professional body.
Rent / Office Costs
If you work from an office you can claim all the costs associated with the running of that office. Business rates, rent, water etc
Any stationery you buy to use in the business or indeed promote the business is an allowable expense.
Subsistence, Food and drink
This can be tricky as HMRC argue you need food and drink to live! So is not an expense but there are a few exceptions. If you have employees then the cost of providing tea, coffee etc is an allowable cost. If you are a Sole Director then unfortunately this is not the case.
Telephone, landline, Broadband
If you have a separate business contract for any or all of the above then the costs can be claimed/paid by the company. However, if you use your home telephone, personal mobile etc you can only claim a %. You can however provide your employees with a tax-free mobile phone.
You can claim costs incurred when travelling for business purposes including flights, hotels etc but any personal expenditure when on the business trip is not allowed.
Hosting, building your website are all allowable costs.
Gifts Small gifts to employees are usually allowed but be careful, too many in one year or a one-off large gift could result in a benefit in kind for the employee.
Salaries These are allowable expenses.
Pensions Contributions made to the Companies Pension scheme are allowable costs, but not contributions to your Personal Pension.
PAYE & National Insurance These are deducted from Employees’ salaries/wages and are allowable costs.
Staff Training These are allowable as long as they are wholly and exclusively for the purpose of the business.
Entertaining Staff In general, entertaining is not allowed unless it is a staff event like a Christmas party, the event must be open to all staff and not cost more than £150 per person attending.
Entertaining Clients These are also not allowable expenses but can be paid for by the Company.
Only revenue (as opposed to capital) expenses can be claimed as a direct deduction from profits. The expenses must be ‘wholly and exclusively for the purposes of the trade/business. However, where a cost is only partly attributable to a business HMRC usually allow that proportion to be claimed.