“What expenses can I claim?” is something every business owner will ask themselves at least once. Claiming expenses is important to any business – both sole trade and limited company – as it actively lowers your taxable income and increases your take home pay.
What are expenses?
An expense is a purchase related to your business that is made using your personal finances or business bank account. The general rule for items that can be bought and subsequently claimed as expenses is that they have to be “wholly and exclusively” for your business. So that round of drinks you got in for mates down the pub doesn’t count, sadly.
If you run your business as a sole trader you’ll be able to make purchases through your personal or business account (if you have one). Ensure you keep a record of this – whether that’s an invoice or receipt – and claim it back when you complete your self assessment at the end of the year.
If you’ve set up your business as a limited company, you can either make business purchases through your personal account (and claim this back from the business account) or make purchases from the business account directly.
For example, Johnny is the Director of his own mobile disco business. He needs a new lighting rig. This costs Johnny £2000 and he pays for it with his business account. This purchase would be classified as a business need and eligible to be claimed as expenses therefore lowering Johnny’s taxable income and increasing his take home pay.
What can you claim?
Which expenses you’re able to claim is dependent on the type of business you operate. For example, Johnny is able to claim a lighting rig for his mobile disco business, however, he would struggle to justify a garden water feature as being “wholly and exclusively” for business purposes.
A business need is equipment that is necessary and essential to the running of your business. For example computers, printers and software. Johnny’s lighting rig would also fall under this category as it is a necessity for him to have one – nobody likes dancing in the dark (unless you’re Bruce Springsteen).
Travel and subsistence
If in your working day you travel to other destinations away from your place of work you may be able to claim these as a travel expense. Note, your journey to and from work is not claimable.
Depending on your specific mode of transport, HMRC allow you to claim a certain rate per mile. Whether you use a car, van, motorbike or bicycle to journey around, being aware of what business mileage you can claim will lower your profits and increase your take home pay. You’ll also need to record business mileage slightly differently – you can grab a free mileage log here.
Let’s say Johnny works from home on his mobile disco business the majority of the time – making playlists, taking bookings etc. He travels in his van to different locations throughout the week. His business mileage would be claimable as an expense.
Even in the digital age people still use pens, pencils and postage – amongst other office equipment – to ensure their business runs smoothly. These type of items are eligible for business expenses.
If you’re a sole trader working from home for more than 25 hours per week you’ll be able to claim expenses. This simplified, flat rate expense claim saves on having to calculate the proportion of business use you’re getting from your utility bills.
Hours of business use per month Flat rate per month
25 to 50 £10
51 – 100 £18
101 + £26
Use this simplified, flat rate expenses system and calculate your expenses whilst filling out your self assessment.
For a limited company, the HMRC offers a flat-rate £4 a week claimable expense.
Clothing expenses can be claimed for work uniform – as long as it carries a company logo. Protective clothing e.g. steeltoe boots or protective eyewear are also claimable expenses.
As long as your business has you using visual display equipment for continued amounts of time, the cost of an eye examination can be claimed as an expense. Note however that the cost of glasses, frames and lenses is view by a dual purpose – you use it for both home and business and therefore cannot be claimed as an expense.
We’ve all gone into the red occasionally. Luckily, you can claim business costs for bank, overdraft and credit card charges plus any insurance plan your business may have. You can’t claim for repayments on loans, overdrafts or finance agreements.
And saving the best until last: you can join Crunch and have one of our lovely accountants help with your finances and this can be claimed as an expense. What wonderful news!
Find out more about allowable business expenses in our free expenses guide.
Andy Paterson, Crunch
Crunch is a ground-breaking online accountancy firm for freelancers, contractors and small businesses. By combining accredited, award-winning in-house accountants with internally-developed cloud software, Crunch delivers a complete business accountancy service for a flat monthly fee. No costly extras, your own personal account manager, and maximum tax efficiency. The monthly fee is just £64.50+vat. Try the free demo here.