Claiming Business Expenses

Claiming business expenses is an essential aspect of running a successful business. It allows you to deduct eligible costs from your income, effectively lowering your taxable profit and reducing your income tax liability. Understanding which expenses are allowable and how to claim them is crucial for optimizing your tax strategy and ensuring you’re not paying more than you need to.

Everyday allowable expenses cover a range of costs that businesses can deduct. These include general business expenses such as office supplies and equipment, mileage for business travel, subsistence, home office use, professional clothing necessary for work, and accommodation expenses during business trips.

However, the world of business expenses and tax deductions can be complex, with specific rules and regulations governing what you can and cannot claim. Our guide will show what you can claim and how to claim them.

We offer a free Excel business expense template to reclaim any expenses you have paid personally. This template is available for immediate download and can be easily integrated into your business operations.

Instructions, including examples, are available on how to use the template. Two versions are available: one for businesses that need to account for VAT and another for those not registered for VAT. This ensures that whether your business is VAT-registered, you can maintain accurate and organised records of your expenses.

Claiming Business Expenses Software

Anyone who has ever run a business knows that expenses can quickly spiral out of control if not carefully monitored. Fortunately, several great software options are now available that can help businesses track and claim expenses.

QuickBooks is one popular accounting software that allows businesses to keep track of all their income and expenses in one place. Pleo is another excellent option that offers expense management and reporting features. Companies can save time and money by using specialist software to track and claim business expenses.

Please read our guide on the best expense management software.

Accounting Software

One of the easiest methods for managing and claiming expenses involves using accounting software. QuickBooks, a leading name in the industry, offers a user-friendly app designed to simplify the process.

This app not only tracks business mileage accurately, using GPS technology to ensure every mile is counted, but it also allows users to photograph receipts and upload them directly to the software. This feature eliminates the hassle of manual entry and keeps all your expense records organised and easily accessible for future reference.

Another alternative is Xero, claiming expenses are available from their Grow plan for a single user and £2.50 for each additional user.

Expense Management Software

Expense management software is a powerful tool that helps individuals and businesses track, manage, and analyse expenses efficiently. This software allows you to easily create expense reports, monitor spending patterns, and gain valuable insights to make informed financial decisions. It streamlines the entire expense tracking process, saving you time and effort while ensuring accuracy and compliance.

Pleo

PLEO is a great way to save time when claiming allowable expenses. When you use Pleo, you can automatically track your receipts and expenses, so you don’t have to worry about losing them. It allows you to easily submit your expenses to your employer or accountant with the click of a button. This means you can spend less time on paperwork and more on what’s important to you.

Wallester

Wallester is another alternative that allows you to issue employees cards and track spending. One advantage to Wallester is that you can issue cards for different projects and also the option prepayment cards.

What Allowable Business Expenses Can I Claim?

Understanding allowable expenses you can claim is essential for reducing your tax bill; however, the rules surrounding allowable expenses can be complex. In the following sections, we will explore the world of allowable expenses, highlighting common categories, providing examples, and key factors to consider when claiming deductions.

Accommodation

If your job requires you to undertake overnight business trips, you are entitled to claim accommodation expenses. The costs must be justified and reflect a reasonable choice; this means avoiding luxury or top-tier hotels in favour of more modest accommodations that adequately meet your needs without excessive spending.

Accountancy and Bookkeeping

You can claim accountancy and bookkeeping fees as long as they are purely for the business. This means that if you use your personal accountant or bookkeeper for both business and personal finances, you can only claim a portion of their fees that relate to the business.

Advertising and Marketing

You can claim online and offline advertising expenses, such as social media ads, Google AdWords, print advertising, billboards, and direct mail campaigns. You can also claim for marketing materials like brochures, flyers, and promotional gifts,

Business Equipment

If you’re self-employed or a company, you can deduct the cost of business equipment, including computers and printers. The equipment cost is on the balance sheet, and each year, depreciation is calculated as an expense.

Depreciation allows business owners to write off the cost of equipment over time. When claiming business equipment costs, you’ll need to calculate the depreciation of each item. Use our depreciation schedule to assist in calculating the figures.

Capital Allowances

Capital allowances are a tax benefit for businesses. They let you deduct some or all of the cost of certain assets (equipment, machinery, or vehicles) from your profits before paying tax. Think of it like a discount on your tax bill for investing in your business.

The way you claim capital allowances depends on your business structure. Here’s a basic overview:

• Sole traders & partnerships: Claim on your Self-assessment tax return. Include the details of the assets and the type of allowance you’re claiming.  
• Limited companies: Claim on your Company Tax Return. You’ll need to include a separate capital allowances calculation.  

Business Mileage

If you use your own vehicle for business travel, you can claim an amount per mile, 45p for the first 10,000 miles and 25p per mile over 10,000 miles. You cannot claim any mileage between home and work. Using this rate, you cannot claim any other expenses concerning your vehicle, e.g. road tax, repairs, and insurance.

If your vehicle is mainly used for business use, you can claim all your fuel, insurance, repairs and road tax. You must make sure that you deduct any private use. It can be completed by calculating the percentage of private travel and calculating the figure.

An example of business mileage is that a small business owner spends £250 a month on their petrol and running costs. They travel 500 miles in total, but 50 of these are private miles. 10% is classed as private use £250 – £25 = £225 can be claimed.

To record mileage, use either an accounting software package like QuickBooks, the expense template below or our mileage log. An example of the small business mileage log is below.

If you have a company car or van, the rules are more complicated, and you will need to find out further information on www.gov.uk

Business Premises

As a business owner, you may be able to claim business premises expenses against your income. This can include rent, business rates, utilities and other running costs. To be eligible, you must use the premises for business purposes.

Clothing

You can claim expenses for specialist clothing necessary for your business operations, such as steel-capped shoes, safety wear, and specific uniforms designed for your job. This includes items essential for your workplace’s safety and requirements.

However, it’s important to note that you cannot claim for general clothing items you might wear to work. This means everyday wear does not qualify for claims under these guidelines, even if used for work.

General Business Expenses

Most general office expenses are eligible for reimbursement, covering a wide range of costs. This includes basic supplies like stationery, phone bills, ink, and printing costs for marketing materials or internal documents. Additionally, expenses related to advertising efforts, insurance premiums to protect the business, rent for office space, utilities to keep the office running smoothly, and the purchase of goods intended for resale are all reclaimable.

Insurance

Insurance includes premiums for essential business insurance like public liability, professional indemnity, employer’s liability, and property insurance. You can also claim for insurance covering specific assets such as vehicles, equipment, or stock. However, it’s important to note that personal insurance policies, such as life insurance or private health insurance, are generally not allowable expenses.

Payroll

Payroll costs like salaries, wages, bonuses, and employer National Insurance contributions are generally allowable expenses for businesses. Pension contributions made by the employer on behalf of their employees are also considered allowable expenses.

Pension

As a sole trader, it’s important to understand that you’re not eligible to claim contributions to a personal pension scheme as a business expense. A Limited company has the advantage of establishing a business pension scheme. This allows the company not only to contribute towards the pensions of its staff but also to potentially enjoy tax benefits from these contributions. Setting up a business pension scheme can be a valuable perk for employees, demonstrating the company’s commitment to their long-term well-being and financial security.

Professional Fees

You can claim certain professional expenses as business deductions against your income as a self-employed professional or limited company. These expenses must be incurred “wholly and exclusively” in the course of your business, and they must be for the purpose of generating income.

Common examples of deductible professional expenses include solicitors, accountants, bookkeepers, and any other professional fees you may incur while doing business. Note that you cannot deduct personal expenses, even if they relate to your business.

Subscriptions

Subscriptions to professional bodies, trade journals, and other relevant publications are generally considered allowable expenses for businesses. Subscriptions can help you stay informed about industry developments, best practices, and regulatory changes, ultimately benefiting your business.

Travel and Subsistence

As well as business mileage, you can also claim for train, bus, tolls and parking if they are business-related. You can’t claim for your normal commute to work.

Subsistence is the tax definition of food and drink. You can claim subsistence if you are away from your normal place of work. The rates are as follows, and the maximum amount:

• £5 if working away for at least 5 hours
• £10 if working away for at least 10 hours
• £25 if working away for at least 15 hours and late after 8 pm

To claim, you must have incurred a cost.

Claiming Business Expenses for Working from Home

If you’re working from home, you can claim your expenses in one of two ways: a fixed rate, known as simplified expenses, which simplifies the calculation process, or you can choose to claim a percentage of your actual costs.

The fixed rate is calculated on the number of hours worked at home per month.

25 to 50 hours = £10 per month

51 to 100 hours = £18 per month

101 or more hours = £26 per month

An example of a fixed expense is that you work 70 hours at home per month; you can, therefore, claim 12 x £18 equals £216 per year.

To claim a portion of your expenses, you must account for costs such as heating, electricity, council tax, mortgage interest, rent, and internet. Next, figure out the fraction that relates to your business activities.

Example: 1 room of a 5-room house is used for business three days per week. The total house expense is £200 per month. £200 divided by 5 rooms is £40. It is only used for 3 days per week, therefore, claiming 3/7 of £40, which equals £17.14 for 3 days.

Business Expense Template

To help claim business expenses, we have developed two Excel templates to record your Expenses. There are VAT and non-VAT options; both allow you to enter the mileage and all other payments that have been made. The figures can then be posted to the accounts, and you can claim back the value of the expenses.

Further Advice for Claiming Business Expenses

Claiming business expenses can be complicated; the above is only a guideline, and full details can be found at www.gov.uk

If you are unsure of what allowable business expenses you can claim, check with your accountant.

Return from claiming business expenses to Excel bookkeeping templates.