Are you one of thousands of business owners about to file your accounts for the last financial year, but unsure what you can claim on expenses? Read our latest article for advice on what business expenses are allowable including travel, office and financial costs.
Before we start, it’s worth noting the distinctions between your expenses; these being costs you can claim as allowable expenses and those you can claim as capital expenses.
Allowable expenses cover pure business costs (e.g. salaries and wages). Capital expenses relate to assets that you will keep and use in your business or trade, but rather than claim the cost of the expense through your profit and loss account you claim capital allowances against your taxable profits.
However sole traders and limited companies have different rules on expenses, so make sure you’re aware of what guidelines you need to follow. Let’s get started on the main expenses claimed.
This covers all car (considered a capital expense), van and other travel expenses such as vehicle insurance, repairs and servicing, fuel, parking, breakdown cover and any other transport used for business, such as bus, train or taxi. Other business travel expenses, such as accommodation or meals (on overnight business trips) can be claimed for. You can claim for purchasing business vehicles.
For fuel or mileage costs, you can claim the following:
Cars/vans – 45p per mile up for the first 10,000 miles and 25p per mile thereafter
Additional car passenger – 5p per mile per passenger
Motorcycles – 24p per mile
Bicycles – 20p per mile
Van benefit charge and fuel benefit charges for cars and vans
From 6 April 2022, the van benefit charge and fuel benefit charges for cars and vans will be increased. This means that you can claim for fuel costs when an employee is provided with a company van or car which is used for personal travel. The flat-rate van benefit charge will increase to £3,600; car fuel benefit will increase to £25,300; and the flat-rate van fuel benefit charge will increase to £688.
If you have running costs for your office (whether that be a work space at home or a rented office), you can claim for ‘stationery’ including phone, mobile, fax and internet bills and other equipment such as postage costs, printer ink/cartridges and computer software (you use for less than 2 years/ licensed). It goes without saying that you can only claim for items that are for business use.
You can also claim for rent, rates and insurance costs for running your business. These are typically rent for business premises, utility rates such as water or electricity and property insurance.
Clothing can be claimed as an expense, but it must be a uniform, costume or protective gear. Clothing specific to your work. It cannot be clothes you usually wear, even formal business outfits.
Your business can claim for a multitude of other expenses such as staff costs (salaries, bonuses, pensions etc), marketing (advertising and website costs), reselling goods (stock, materials and costs from producing goods) and even training, but there are set guidelines as to what is accepted. Do check with an accountant if you’re unsure!
Legal and financial expenses, such as accountancy fees, bank charges and trade body membership can also be claimed on your accounts.
While business expenses can seem overwhelming when it comes to filing accounts, success comes in the planning and preparation you lay down before. If you are self-employed do make sure that your accounts are well organised and that any expenses are correctly categorised as ‘allowable’ or ‘capital’. This will save you lots of time when it comes to filing your self-assessment! Do of course, keep all receipts/invoices for at least 5 years after the 31 January submission deadline of the relevant tax year in case HMRC ask for proof of your expenses. Finally, be realistic on what expenses are actually for business use. While a networking event can be claimed as a business expense, a business meeting with food and drinks cannot. As always, seek advice first from a Chartered Accountant.
If you have any questions on business expenses, we’re here to help. Get in touch for advice on your small business on 01752 665134 or email us at email@example.com to arrange a free consultation.
Our expert team provides a range of accountancy services including bookkeeping , payroll and tax returns.