All businesses can claim allowable expenses – even those incurred by a limited liability company (LLC). This includes telephone calls and postage stamps.
Businesses can claim certain expenses without having to prove how many they cost. These include things such as telephone calls, photocopying, stationery, printing, and postage.
A limited company must pay corporation taxes based on its profits, no matter what. If you make a loss, you still owe corporation tax.
Expenses for limited companies: the fundamental regulations
The UK government has published its guidance on how taxpayers are supposed to record and pay tax on their limited company expenses. This includes things like office equipment, salaries, and business insurance, among others. But it doesn’t cover everything – there are some items that you shouldn’t deduct from your income. Here’s what you need to know about those deductions.
How to recoup costs as a limited liability company
If you are running a small business, you might want to consider becoming a Limited Company. This could make it easier for you to raise finance, pay yourself a salary, and claim tax deductions. However, there are some things you need to know about how to do this properly.
A limited company is a legal entity separate from its shareholders. You cannot become a shareholder unless you buy shares in the company. If you don’t already have shares in another company, you’ll need to register a company with Companies House.
Once registered, you can start paying yourself a salary. But you won’t be able to claim tax deductions for this. Instead, you’ll need to use a payroll provider such as Xero or Quickbooks Online. When you’re ready to pay yourself a salary, you’ll need to issue invoices to your customers. These invoices will show up on your customer records under “expenses.”
You may also want to set up a bank account for your company. Once you’ve done this, you’ll be able to deposit money into the account. To record this payment, you’ll need to enter it in your accounting software.
The next thing you’ll need to do is prepare your accounts each month. This includes preparing VAT returns and filing them with HMRC. You’ll also need to submit an Annual Return to Companies House.
To complete the process, you’ll need to send out a final invoice to your customers. This will include the amount of VAT paid, plus interest. If you owe any taxes, you’ll need to pay them now.
How to maintain limited company business spending records
Keeping accurate records of your business expenses is essential. If you don’t do it properly, you could face tax problems later down the line. Here are some tips on how to make sure you’re keeping good records.
1. Record everything
You’ll want to keep a record of every expense you incur while running your business. This includes anything from rent to travel costs to marketing materials. You might even include things like office supplies, utilities bills, and insurance premiums.
2. Don’t forget about VAT
If you run a Limited Company, you’ll probably pay VAT on certain items such as office equipment and furniture. However, you won’t always know whether you’ve paid enough, so it’s important to keep a note of what you spend.
3. Save receipts
Make sure you save copies of all receipts you receive. These include bank statements, invoices, credit card statements, utility bills, and anything else that relates to your business.
Limited company costs you can claim
If you run a small business, you might be able to deduct some of your costs against tax. But what about those eye exams and health checks? What if you wear prescription glasses or contact lenses? Can you claim them as business expenses? Here we explain how to do it…
You can claim for eye tests if you use them purely for work purposes. You don’t need to be registered as self employed to make a claim. If you’re working in a job where there’s a risk of injury, you could be eligible for occupational insurance cover. This includes jobs like construction workers, miners, firefighters, police officers and paramedics.
You can also claim for health checks if you use them exclusively for work. These include blood pressure tests, cholesterol checks, glucose tests, body mass index tests and bone density tests. They must be done within 12 months of starting work.
You can claim for prescription glasses or contacts if they’re worn solely for work. You’ll need to show evidence of wearing them for at least 20 hours per week over the course of three months.
Business insurance expenses
If you buy insurance, it helps protect against loss and damage. If you are self-employed, you must deduct your insurance premiums from your taxable income. But what about those small businesses that do not make enough money to qualify for federal taxes? Are there ways to deduct some of your insurance costs? Yes! Here are three deductions you might want to consider.
#1 Deducting Your Business Insurance Costs
Insurance companies offer different types of coverage. Some policies cover property losses such as fire or theft; others cover liability risks like lawsuits or medical bills. Some even provide workers’ compensation coverage.
You cannot deduct the cost of general liability insurance, but you can claim a deduction for specific kinds of insurance. For example, you can deduct the premium for auto insurance. You can also deduct the amount you spend on home owners’ insurance. However, you cannot deduct the cost of life insurance because it is designed to benefit someone else.
#2 Deducting Small Business Expenses
If you run a sole proprietorship, partnership, or corporation, you can write off many of your business expenses. These include advertising, office supplies, travel, meals, entertainment, and equipment. You cannot deduct the cost of repairs or maintenance, however.
#3 Deductions for Unreimbursed Employee Business Travel
Your employer does not reimburse you for certain business expenses. This includes mileage, parking fees, tolls, and transportation costs. You can deduct these expenses on Schedule A of Form 1040.
Note: You cannot deduct unreimbursed employee business expenses if you work for yourself.
Advertising, marketing and PR expenses
Any costs related to advertising, marketing and public relations activities should be treated as Limited Company Expenses. These include any fees paid to third party providers such as agencies, consultants, accountants, etc.
This does not apply to any costs incurred by the Directors or employees of the company.
Business travel accommodation expenses are defined as any costs incurred while staying out of home during a business trip abroad. These costs include everything from food and drink to laundry and cleaning. You can claim up to £1,250 per month for accommodation expenses. This includes accommodation charges such as rent, board and lodging, room taxes, utilities, telephone calls and internet access.
You can claim for accommodation expenses if you are working outside your normal place of residence and are required to stay there because of your work. If you’re on holiday, however, you can’t claim for accommodation expenses unless it’s part of your job. In most cases, you won’t be able to claim for accommodation expenses for trips taken purely for leisure purposes.
If you’re claiming for accommodation expenses, make sure you keep receipts showing exactly what you’ve spent.
Travel and subsistence costs cover all meals and drinks consumed while traveling. You can claim for these costs if you are working outside of your normal place of residence. For example, if you are based in London but are sent to Paris to meet clients, you could claim for your travel and subsistence costs. However, if you are on vacation, you cannot claim for these costs.
There’s a limit on how long you can claim for travel and subsistence costs. You must be away from home for 30 days or longer within 12 months. So if you spend three weeks in France and one week in Spain, you can only claim for the cost of the flights and accommodation for the duration of your stay in France.
The amount you can claim depends on where you are going and how long you’ll be away from home. Check our guide to see how much you can claim.
Business accounts are ideal for companies because they offer many benefits over personal accounts. They allow you to make payments online, receive money into your account, pay bills, transfer funds, etc. However, it’s important to understand what types of fees come along with these accounts. For example, there might be no charge for receiving funds into your account, but there could be a fee for transferring those funds out of your account.
The same is true of bank charges. If you use a personal checking account, you won’t see any charges for making deposits, withdrawing cash, or paying checks. But if you open a business account, you’ll likely incur some type of bank charge. There are several different kinds of bank charges, including monthly maintenance fees, ATM usage fees, overdraft fees, check processing fees, and others.
If you want to avoid incurring these fees, consider opening a business account. You’ll still have access to all the features of a personal account, such as having free transactions, low fees, and unlimited withdrawals. Plus, you’ll enjoy the added benefit of being able to take advantage of additional perks offered to businesses.
For example, banks often waive certain fees for small businesses. This includes monthly maintenance fees, ATM fees, check processing fees and others. And since most banks offer free online banking, you’ll have easy access to your financial information 24/7.
You can find out more about how to choose the best bank for your needs here.
HM Revenue & Customs does not allow childcare to being claimed as an expense, although it allows employees to claim tax relief through salary payment. However, employees can claim tax relieve through salary payments into either the Childcare voucher scheme or the Childcare expenses allowance scheme.
The maximum amount of money that an employee can spend on childcare each year is £2000 under the Childcare vouchers scheme and £4000 under the Childcare expenses allowance schemes.
Use of home as office
Home offices are becoming increasingly common among small businesses. They offer several benefits including saving money on rent and utilities, boosting employee morale and productivity, and creating a positive work environment. However, there are some drawbacks to operating out of your house. Here are three things to keep in mind before making the move.
1. Space Requirements
Before you start thinking about where to put your desk, think about what you want to accomplish. Do you just need a place to do paperwork? Or do you plan on having meetings here? If you’re planning on working remotely, make sure you have enough room to comfortably conduct phone calls and video conferences.
2. Utilities Costs
If you operate your business from home, you’ll likely incur additional utility bills. These include electricity, internet access, and water usage. Some states require businesses to pay taxes based on the amount of square footage used. Make sure you know whether you need to register as a commercial entity in your state and what type of tax you’ll owe.
Employees often complain that their boss is too far away. While it might seem like a great idea to be able to walk into your office whenever you feel like it, it could actually hurt your business. When employees don’t see their bosses regularly, they tend to lose respect for them. Plus, they’ll probably spend less time doing quality work because they won’t be motivated to give their best effort.
Gifts, entertainment and trivial benefits
The UK government has announced changes to how it treats gifts and benefits given to employees. This includes declaring any gifts or benefits given under the Gift Aid Scheme.
A gift or benefit is defined in law as anything other than money. So, giving someone a meal, flowers or tickets to a show are all considered gifts or benefits. But if you offer someone a cash reward for doing something, it isn’t a gift or benefit.
Employees who receive gifts or benefits won’t usually have to pay income taxes on them. They’ll just add the value of the benefit to their taxable income.
If you’re unsure whether something counts as a gift or benefit, check out our guide here.
Professional subscription expenses
Subscriptions come in different flavors. While some publications charge per month, others require a yearly fee. And there are even variations within each category. For example, a magazine might offer a discount for multiple subscriptions. Or it could give away free issues for those who sign up for a full year.
The most common way to pay for a subscription is via credit card. But there are plenty of other options. You can use PayPal, Apple Pay, Google Wallet, Amazon Payments, or another payment method. In addition, some companies provide discounts for multiple subscriptions. Others might offer special deals for students.
To make sure you don’t miss out on any savings, check out our list of the best magazine subscription offers.
Limited companies can claim all of the phone bills as an expense. This includes mobile phones, landlines and VOIP lines. If you are running a small business, it is recommended that you keep track of how much you spend on business calls. You can use a tool such as MyExpenses to do this.
Home phones can be claimed as a business expense if you are working from home or otherwise conducting business related activities. There are some exceptions to this rule. For example, if you are using a personal cell phone to conduct business related activities, you cannot claim the cost of the call as a business expense. However, if you are using your employer’s office number, you can claim the cost of the calls as a business expense.
If you are self employed, you can claim all of the costs associated with your mobile phone bill as a business expense. You must include the following information on your tax return:
• Your name
• Your address
• Contact numbers
• The amount of your monthly mobile phone bill
Annual staff party expenses
The annual staff party is one of those things that happens every year. You know it’s coming up, and you plan accordingly. But what do you actually spend money on? And does it count towards your taxable income? We take a look at what you can deduct, and whether you need to keep records to make sure you don’t accidentally break the law.
Computer software can be claimed as part of running your business or saving you money. You can claim computers, tablets, phones, laptops, printers, scanners, fax machines, projectors, conference rooms and other office equipment. If you use these items mainly for work, you can include them in your costs too.
Chair and desk items can be included in your costs if they are used mainly for work. This includes chairs, tables, desks, filing cabinets, shelves, bookcases, bookshelves, cupboards and storage units. They don’t have to be fancy; just make sure you use them for work.
If you rent out space in your home, you can claim the cost of furniture and fittings, such as couches, beds and wardrobes.
You can’t claim anything that isn’t useful for work. For example, you can’t claim travel costs unless you use a computer while travelling.
Professional development expenses
Personal development or training courses can help you grow professionally. You might want to learn how to improve your leadership skills, boost your career prospects, become better at your job, or develop a new skill set. If you are taking part in such a course, you could claim the cost of attending against your income tax.
You can make a personal development payment each year, up to £3,600 per person. This includes things like learning new languages, developing new skills, improving your health, and even getting married. There are no limits on how many times you can do this in a lifetime. However, there are rules about what constitutes a “personal development course”. For example, you cannot claim money spent on courses run by charities or religious organisations. And you must prove that the course is for your benefit – for instance, if you go on a language course because you want to travel abroad, you won’t be able to claim it.
If you are running a self-employed business, you can claim expenses incurred in connection with running your business against your profits. These include things like advertising costs, marketing materials, office equipment, and professional fees.
Make sure you’re doing it to gain work experience
The main purpose of most personal development courses is to help you develop your skills and knowledge. But some people take part purely for fun, enjoyment, or just to keep fit. In those cases, you don’t qualify for a deduction. So check whether the course is primarily designed to give you work experience, or whether it’s mainly about having fun.
Your employer doesn’t have to pay for you to attend a course
Many employers offer their employees paid time off to participate in personal development courses. They usually cover the cost of the course itself, and sometimes provide additional benefits too. If you are offered this sort of time off, ask your boss whether he or she expects you to use the opportunity to attend a personal development course. If you decide to go ahead anyway, remember that you still need to prove that the course is directly related to your work.
If you use your car to commute to work every day, it might seem like a no brainer to claim the cost of fuel, maintenance and wear & tear against your personal income taxes. However, there are some limitations to claiming travel expenses as Limited Companies expenses. You must be able to prove that the purpose of the trip was work related.
Limited companies are taxed differently to individuals. They pay Corporation Tax based on their profits rather than their individual incomes. This means that the amount of Corporation Tax paid depends on how much profit the company makes during the year. If the company loses money, it pays less Corporation Tax. In addition, the company is required to pay National Insurance Contributions on behalf of each employee.
The rules around travel expenses are quite complex, as they relate to both Corporation Tax and NI contributions. For example, you could claim the costs of commuting to work as Limited Company expenses, but you could not claim the same costs as Personal Income Tax. Similarly, you could claim the cost of travelling to meetings and conferences as Limited Company expenses, while you couldn’t claim those same costs as Personal Income Taxes.
In general, the following types of trips qualify as Limited Company expenses:
• Trips taken away from home for work purposes;
• Trips taken within the UK for work purposes;
The cost of setting up a new business varies greatly depending on what type of business you want to start. This includes things such as legal fees, initial inventory, marketing materials, and even office space. You might even consider hiring employees during the early stages of your business. These costs are known as startup costs.
In some cases, it is possible to deduct some of these costs against tax. However, there are certain rules that apply to each situation. For example, you cannot claim startup costs for a business that does not exist. If you are running a sole trader, you can claim startup costs for three years following the date you set up the business. After that, you can continue to claim them for another five years.
If you are operating as part of a limited company, you can claim startup expenses for 10 years after the date you incorporated. As soon as you make a profit, you can stop claiming startup costs.
You can find out more about startup costs here.
vs “Payroll” – What’s the difference?”
If you’re thinking about starting a side hustle, it might seem like a good idea to set up a payroll account. But there are some important differences between setting up a payroll account and having a salary. Here’s what you need to know.
1. A Salary Is Taxed
A salary is taxed at source, meaning that you pay taxes on every dollar earned.
2. Your Income Can Increase Over Time
You don’t have to receive a raise each year to increase your taxable income. If you work hard and put in extra hours, you could end up earning more money over the course of a year. In this case, you’d still pay the same amount in income tax as someone who earns less.
3. You Don’t Have To Report It
The rules around salaries aren’t always clear cut. Some employers require employees to declare their earnings, while others do not. However, if you choose to keep your salary under wraps, you won’t have to report it.
A pension pot allows you to save money without having to pay tax on it. You can put up to £40,000 into one, and you don’t even have to start taking out money until you’re 60. But there are rules about what you can do with your savings – and some people are finding ways around those rules.
are not allowed as an allowable expense
If you run a small business, it’s likely that you spend money on entertaining clients, suppliers, partners, etc., either in person or over the phone. These expenses are generally considered to be business expenses, and therefore, they’re not allowed as an allowable deduction against profit. However, there are some exceptions to this rule. If you’re a member of a professional organization such as the Institute of Chartered Accountants of Scotland, you might be able to claim the cost of attending meetings as a business expense. You could also deduct the cost of meals, drinks and travel as a business expense, subject to certain conditions being met.
Business entertainment costs will be disallowd in the profits of the companies, even though you paid yourself. For example, if you pay £1,500 for a meal with a client, you won’t be able to claim the full amount as a business expense. Instead, you’ll only be able to claim half (£750). This applies whether you’ve personally paid for the food or whether the company has paid for it.
Keep your business as tax efficient as possible
You don’t want to end up paying too much tax – that’s why it’s important to keep track of your deductions. Make sure you know what you can and cannot claim as a business expense. In addition, make sure you’re keeping accurate records of your expenses. You must be able to prove that you spent the money on something that benefited your business.
Work hard, insure easy
Insurance is one of those things you probably don’t think about unless something goes wrong. But it’s actually an essential part of running a successful small business. And while most people know what insurance covers, there are some misconceptions out there that could cost you money. Here are five common myths about insurance and why they’re false.
Myth #1: You Should Have Liability Coverage Only If Your Customers Cause Damage
If someone gets hurt because of your product or service, you want to make sure you’re covered. After all, you wouldn’t want to go bankrupt just because your customer slipped on spilled coffee. However, liability coverage isn’t always necessary. For example, if your customers come into contact with your products accidentally, you’ll likely be fine without having to pay out a claim. In addition, if you sell food, you might be able to avoid paying claims if you provide adequate training to your employees.
Myth #2: You Don’t Need Property Coverage Unless You Sell Products
The same logic applies here. If you sell items like furniture and appliances, you won’t necessarily need property damage coverage. But if you sell electronics, clothing, or other high-value items, you do need to consider property damage protection. This type of coverage protects against theft or accidental damage to your inventory.
Myth #3: You Can Get By With Just Commercial Auto Insurance
Although commercial auto insurance does cover vehicles used for work purposes, it doesn’t cover everything. For instance, it typically excludes personal use items such as cell phones, laptops, and even pets. Also, it doesn’t include general liability coverage, which protects against lawsuits filed by third parties.
Frequently Asked Questions
What are tax-deductible expenses?
Tax deductible expenses are those things that businesses can deduct from their taxable income. These include things like vehicle maintenance, office equipment, rent, and advertising. They’re usually things that help the business grow. If a business doesn’t pay enough tax, it could lose out on benefits such as grants and loans.
The government says that tax deductible expenses must be “ordinary and necessary”. This means that there must be some reason why the expense exists beyond just making profits. For example, if a business buys a van because it needs one to deliver goods, that’s fine. But if a business spends thousands of pounds buying a van simply because it looks good, it won’t be allowed.
Business owners should check whether their expenses qualify under the rules. If they do, they can claim back the VAT paid on them.
How do I account for staff expenses?
Some employee expenses are claimable under the rules of self-employment taxation. These include things like travel costs incurred while working away from home, meals eaten when out on assignment, and even some entertainment expenses. You don’t necessarily need to deduct every single expense claimed – just make sure it’s reasonable and necessary.
Many of these expenses will in fact count as allowable business expenses, meaning you can claim them against your income taxes. This includes things such as hotel accommodation, meal expenses, and even some entertainment costs.
Make sure your employees always keep receipts when claiming for expenses. If they do, you can in turn claim against those that are deductible.