1. Office supplies
Office equipment and tools are items you use every day to run your business. They include things like computers, printers, fax machines, copiers, scanners, phones, tablets, projectors, furniture, etc. Many businesses claim depreciation expenses on these items because they’re considered “business assets.” But what about small tools like screwdrivers and hammer? Do you really need to depreciate those?
The government allows businesses to deduct certain types of expenses over a period of years. These expenses are called depreciation expenses. If you buy something new, such as a computer, it’s usually written off over several years. Depreciation is useful for keeping track of how much money you’ve spent on an item.
Depreciation rules vary depending on whether the property is personal or real estate. For example, a car isn’t depreciated; rather, the cost is added to the vehicle’s value each year. However, most office equipment and tools are depreciable. You can take a deduction for the full amount you paid for the item during the year you bought it.
Here are some examples of common office equipment and tools:
2. Donations to a charity
Charities must register with HM Revenue & Customs (HMRC) to receive tax relief. Donations made directly from wage or pension payments are 100% tax free, while gift aid is available to all those who donate to registered charities and make donations via post.
3. Mileage costs
Claiming a mileage allowance is easy and straightforward. But there are different allowances depending on what type of vehicle you use, and where you travel. A bike is cheaper to rent than a car. And even though a car is usually a better option for long journeys, it might cost less to take the bus or train. So how much does it really cost to claim a mileage allowance? We explain…
Mileage costs are not covered by most car insurance policies. However, some companies do offer coverage for certain types of vehicles, such as motorcycles, mopeds and scooters. These coverages are often included within standard car insurance policies. If you want to find out how much a policy covers, check with your insurer.
If you don’t have car insurance, you’ll probably have to pay for your mileage yourself. For example, if you’re renting a car, you’ll need to pay for petrol, toll charges and parking fees. You could also consider hiring a bike or taking public transport, although this will obviously depend on where you live.
The average cost of a mile varies according to the type of vehicle you’re driving. In 2017, the average cost per mile travelled was £1.53 for cars, £0.95 for motorbikes and £0.51 for cycles. This figure includes fuel, maintenance and depreciation.
4. Legal and financial costs
The legal and financial costs incurred by businesses are often underestimated. These costs include legal fees, professional indemnity insurance premiums, court fines, interest payments, etc. They are usually added up as part of the self assessment tax bill. However, some companies do not claim these costs as part of their Self Assessment tax bills because they don’t know how to calculate them properly.
This article explains why you should consider including legal and financial costs in your Self Assessment tax bill.
5. Unpaid invoices
Bad debts are an important part in running a successful business. They can be included on your self assessment tax returns. If you use cash basis accounting, it could mean losing out on tax deductions.
6. Marketing costs
Advertising is an important tool for small businesses to promote themselves online. But it’s also a great way to spend money you might otherwise save. If you run a small business, here are some tips to help you avoid spending too much on advertising.
1. Track Your Expenses
The HMRC requires small businesses to report certain types of expenses, such as advertising, travel, supplies, entertainment, etc., in order to claim tax breaks. You can use software like Xero Accounting to easily record and analyze your expenses.
2. Keep Track Of All Costs
If you do end up claiming a deduction for a particular expense, make sure you keep track of every penny spent. This includes everything from printing flyers to paying for ads on Facebook.
3. Don’t Overlook Small Print
There are many different types of advertising, including print, radio, TV, social media, etc. Each type of ad has specific requirements and limitations. For example, print ads must be no larger than 4 inches wide while radio spots can be as long as 30 seconds. Make sure you read the fine print before submitting your claims.
The government says employers are legally obliged to provide workers with appropriate clothing. This includes things like workwear, such as overalls and safety boots. But what does “appropriate” mean? And how much do you actually need?
In a recent case heard at the Employment Appeal Tribunal, it was ruled that a worker had been unfairly dismissed because her employer failed to provide her with suitable clothing. She claimed she needed a coat and hat for working outside, but the tribunal found that the clothing she was given wasn’t adequate for the weather conditions.
If an employee needs specialised equipment for their role, they could also qualify for additional benefits. For example, some workplaces might offer free gym membership or subsidise childcare costs.
But there are limits to what employers can give employees. If you’re paid less than the national living wage, you won’t receive any extra money for providing your colleagues with clothes. Nor will you receive any money for providing your colleagues’ children with school uniforms.
And even if you do fall into one of those categories, you’ll still need to make sure the items you buy are eligible for tax relief.
For more information about what you can and cannot claim, check our guide to claiming benefits.
8. Staff costs
Staff costs include everything paid to people who work for you. This includes wages, bonuses, pension contributions, agency fees, subcontracting, and employers’ National Insurance Contributions.
Bonuses are usually paid out after a period of service, and pensions are payments made to retired workers.
Subscriptions are one of the most common forms of financial assistance offered to nonprofit organizations. They can come in many different shapes and sizes, including membership dues, annual fees, donations, sponsorships, and subscriptions to newsletters, journals, magazines, etc.
You can claim a deduction for payments to charity, such as your local food bank, even though those funds aren’t actually used to support charitable activities. However, if you pay someone else to perform a charitable activity, you cannot take a tax deduction for it unless you provide the donor with written consent. If you donate goods or property to a charity, you can deduct the fair market value of the item(s).
Donations to charities do not count as deductible expenses. Instead, they are considered gifts. Gifts are never subject to taxes, so there is no way to deduct them.
If you receive free products or services from a charity, you cannot deduct the cost of those items. For example, if you attend a fundraising event where you receive a T-shirt, you cannot deduct the price of the shirt. But if you purchase a T-shirt yourself, you can deduct the cost of the shirt.
A subscription to an academic journal qualifies as a deductible expense. However, you cannot deduct the full amount of the subscription. Only the portion of the fee that represents actual costs incurred by the publication is deductible.
Some publications charge a nominal fee for access to articles online. These fees usually cover the cost of hosting the site and providing technical support. In addition, some publications offer discounts to students and faculty.
10. Your mortgage and utilities
If you work from home, it is likely you will have a number of household expenses, such as your electricity, gas, water, phone and broadband bills. These are known as Allowable Expenses because they are considered part of running a home.
You can claim a proportion of these expenses as allowable expenses when calculating your Self Assessment income. So, for instance, if you spend £1000 per month on your home, you could claim £500 as allowable expenses on your tax return, meaning you would pay less Income Tax.
However, you cannot claim expenses relating to your mortgage interest or rent payments as allowable expenses. Instead, you must include those amounts on your tax return as Capital Gains, where they belong.
Frequently Asked Questions
How early can you do your self-evaluation costs?
The self assessment (SA) tax deadline for tax year 2021-22 is 31 January 2023. If you want to file your SA returns early, you must submit it no later than 31 December 2022. However, there are some exceptions to this rule – including if you’re filing jointly and/or if you filed your return in 2018-19.
But even though the deadline is set for 31 January 2022, you can still complete your tax return any day after the start of the next tax year on 6 April 2021. This gives you plenty of time to check over your figures and ensure that you’ve claimed everything you possibly can.
How do I choose the right accountant for my business?
The best way to find out what you need is to ask someone who knows. Your accountant is likely already familiar with the accounting software you use, how it works, and how well it suits your needs. He or she might even know some good tax preparers. If you don’t know anyone like this, consider asking friends, family members, colleagues, and professional acquaintances for recommendations. You could also check online directories such as Accounting Today and Accountants Australia to see whether there are any local accountants listed.
You’ll want to make sure that the person you select understands the type of business you run. For example, does he or she specialize in sole proprietorships, partnerships, corporations, trusts, estates, real estate, or another type of business? Do you plan to hire employees in the near future? Does he or she offer bookkeeping services, payroll processing, or tax preparation? How many clients does he or she typically handle? What is his or her experience level? Are you comfortable working with him or her?
If you decide to work with a particular accountant, try to set up a meeting to discuss your financial situation. This gives you the opportunity to ask questions about how he or she plans to help you manage your money and keep track of your accounts. Ask about fees, payment options, and other terms. Also inquire about how long he or she has been practicing, how often he or she sees clients, and where he or she practices. Be wary of “free consultations,” however; most accountants charge a fee for initial meetings.