A Comprehensive Guide to Business Expenses

As a limited company, there are certain business expenses that you can claim, meaning you’ll pay fewer taxes. Unfortunately, whether you’re a seasoned veteran or just starting out, it can be difficult to know which limited company expenses are allowable by HMRC. 

At Newnham & Son, we help our business clients minimize the amount of tax they pay so that they can reinvest their savings into their companies. Read this article to find out more about allowable expenses that you may be forgetting in your yearly business tax return.

Accountancy Fees

As a limited company, you can put all of your accountancy fees against your taxes. That said, these expenses should only include the time your accountant spends working on company affairs, not your personal accounts. At N&S, we include our fee in your end of the year tax return so that it goes against your taxes. 

Accommodation While Traveling for Business

If you travel for business and have to stay overnight, you can also claim your accommodation as a business expense. It is important, however, that this expense remains reasonable. If you show HMRC a receipt of your stay at the Ritz, they will not accept this as part of your accommodation expenses. 

Travel Expenses

There are two types of travel expenses you can claim. These include:

Business Mileage 

If you have to use your car to get to a temporary location for work, you can claim the cost of petrol based on the number of miles you travel. These rates are as follows for the first 10,000 miles within the tax year:

• 45p for cars and vans
• 24p for motorbikes
• 20p for bicycles

If you travel more than 10,000 miles in a car or van within the tax year, the rate goes down to 25p per mile. In addition to reducing your corporation tax bill, you can also get your money back. This, however, is only applicable if you use your personal car and not a vehicle owned by the company itself. 

Car and Van Expenses

If you meet the following conditions, you can deduct your travel expenses from your taxes:

• You pay the travel costs
• You are travelling for work
• The travel isn’t from your home to your permanent workplace

The allowable expenses when it comes to travel  include:

• Fuel
• Parking
• Vehicle insurance
• Licence fees
• Public transport expenses 
• Meals
• Overnight business trips
• Parking fees
• Hire charges

Fines do not qualify as travel expenses. 

Staff Events

Every year, your company can host one annual event as a tax-free benefit. This is why the majority of limited companies host a Christmas party for their staff. The annual limit per member of staff is £150. Each member of staff can bring one plus one, for which you can claim an extra £150. You also have the option to split your “per person” budget in order to host multiple staff events throughout the year.

Charitable Donations

As a limited company, you will pay less Corporation Tax if you make annual charitable donations. These donations can be:

• Trading stock
• Money
• Products that your company makes or sells
• Land or property
• Sponsorship payments

To claim your tax back, we will simply deduct the value of the donations you make from your business profits for that year. 

Equipment and Office Purchases

You can claim tax back for every piece of equipment that your office needs. This includes but is not limited to:

• Computers
• Desks
• Chairs
• Printers
• Software
• Paper
• Pens

Essentially, if the equipment is a consequence of a business need you will receive tax relief for it. 

The Costs of Forming Your Limited Company

Setting up a limited company can be expensive. With this in mind, you can put these costs against your business expenses, thus allowing you to claim tax relief. These expenses can include everything from your equipment, accountancy fees, and any other mandatory formation costs.  

Fixed Assets

If you buy items such as computers and phones for business purposes, you can record these as fixed assets. If the asset stops working or you decide to upgrade it, you can sell or scrap it. In this instance, it’s important that you let HMRC know. This is because every fixed asset within a company should be accounted for each year. 

Healthcare and Pension Payments

If one or more of your employees work abroad, you can help them pay for medical insurance. This qualifies as a ‘benefit in kind’. As a result, the employee will have to pay personal tax on it. Moreover, your company will have to pay 13.8% NICs. 

As a limited company, you can also set up a contract with a pension provider. This allows you to receive payments into your pension that count towards your business expenses and receive 100% tax relief. You may only contribute £40,000 free of tax towards yours and your employees’ pension scheme.

Salaries

All salaries, including the ones your company pays to you, count as allowable expenses. This also includes NICs. With this in mind, you have the right to pay a tax-efficient salary up to the National Insurance threshold. As a business owner or director, this lower monthly salary will allow you to avoid paying NICs altogether. You should consider receiving extra income as dividends.  

Other Expenses

While the above does cover all the major business expenses you can claim tax relief on, you must also remember the following:

• Eye tests 
• Professional subscriptions
• Training expenses
• Using your home as an office
• General office materials (paper, pens, postage, etc.)
• Non-cash gifts under £50

Additionally, don’t forget to claim tax relief on business mobile phones, landlines, and broadband fees. 

Hire a Local Accountant to Identify All of Your Business Expenses

With so many business expenses available to claim tax relief on, it can be difficult to remember everything each year. This is why it is important that you work with a local accountant. Aside from saving you money, a chartered accountant will save you time, allowing you to focus your efforts on the daily operations of your business. 

At N&S, we have extensive experience working with limited companies across the UK and further afield. To find out more about how we can help you save money and time by claiming tax relief on your business expenses, contact us today. All of our friendly team members have the knowledge to answer any questions you may have.