As most people are aware, if you’re thinking of starting a new business or already run one you can claim expenses on some of your costs.
This is a great way to help out entrepreneurs and give them a better chance of success. Why?
Because businesses pay tax on their profits, so when they claim expenses that amount is removed.
So they pay tax on a much lower amount.
If you’re diligent you can save yourself a pretty large chunk of money.
So, what can you can claim for?
The main categories of business expenses
We’ll start with ones you’ve probably already heard of. If you’re using a car, motorbike or a bike for business purposes you can claim on the mileage you accrue.
Tax rates per business mile
|Type of Vehicle||First 10,000 miles||Above 10,000 miles|
|Cars and Vans||45p||25p|
Another fairly well-known option is claiming for things like office equipment and consumables like printer ink that are essential to the running of your company. Your employees can also claim for clothing (such as hiring a smart suit for an event), entertaining clients with food and drink, and the annual staff party as long as the cost per head doesn’t exceed £150.
If you run a limited company, there is a way to claim on some more equipment.
For example, if you have a laptop, you can purchase it off yourself through the company. That will make it a company asset and therefore it’s cost as a claimable expense.
On top of that, you’ll get money straight from the company personally tax-free.
Taking money out of your business
Rent and bills
If you happen to work from home, you can also claim on rent, mortgage and bills too by charging some of the costs through your company, although there are some limitations.
The amount of rent you can claim is all based on the space dedicated to actual business.
For example, if you have an office you only use for business which takes up 10 per cent of the square footage of you flat, you can claim 10 per cent of your rent as expenses.
If you work in a room for half the time and use it as a normal room the other half of the time, you’d only be able to claim 5 per cent of the rent back.
In regards to bills, they work in a similar way and need to be divided between those used when doing business and not.
Obviously, this is a bit more complicated to figure out, so it might be worth looking into a dedicated Internet and phone business account instead.
Top reasons why expenses go unreimbursed
|Reason||Percentage not reimbursed|
|Losing the receipt||46%|
|Missing the deadline||33%|
|The expense did not comply with policy||30%|
|Entering the wrong description by mistake||15%|
|There was a mistake on the part of the finance department or accountant||11%|
Another area to keep an eye out for is capital allowances. This includes things like machinery, gifts of equipment to charity and even fixtures.
You can’t claim for the expenses on some of these things and so instead you must claim for a capital allowance. It can be quite a complicated area though.
Business expense trackers
There are firms that offer a digital alternative to printing out and filling out paper forms manually when you put through your expenses.
The SaaS software firm allows you to scan in your expense forms digitally via your smartphone and claims it can detect duplicate expenses.
Amex’s mobile app allows businesses to track employee spending and can match receipts to business card transactions which could help reduce fraud in your business.
Its finance app says it can automate expense reporting, can import credit card transactions and control expenditures.
The app allows your business to scan and manage receipts, track employee mileage using GPS and syncs with the Gmail receipt function – ‘very handy,’ said one user.
There are plenty more things that you can claim expenses for and HMRC have a full list here.
If you do want to claim, obviously you’re going to need proof of these expenditures. Make sure you keep track of all your invoices, receipts and papers and store them somewhere safe.
Keep them well ordered as well to save a lot of time in the future.
One final thing to keep in mind is that HMRC can come back and request proof of expenses up to six years after they’re claimed.
So, if you’re thinking about chucking out your papers once HMRC have accepted your accounts, think again. If you’re unable to give proof when asked later on, you could be asked to pay the money back.