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Understanding Business Expenses: What Can You Claim?

If you're a small business owner, you may be wondering which expenses are allowable and which can be claimed for tax relief. While having proof of purchase is important, it's not the only factor to consider.

Business expenses are products or services that help keep a business running. These costs can be deducted from income when calculating taxable profit. Some examples might include stationery, phone bills, and travel costs. Revenue expenses, such as rent, insurance, heating, repairs, and maintenance are some of the most common business costs during an accounting period. Capital expenses, which are assets likely to have lasting benefits, qualify for a form of tax relief known as capital allowances.

Here is a list of some revenue expenses and the types of expenses HMRC allows you to claim for tax relief:

  • Wages, salaries, and related staff costs

  • Insurance, rent, rates, and power

  • Car, van, and travel expenses

  • Advertising and marketing

  • Other office running costs

  • Professional fees

  • Banking and other financial charges

However, there are some revenue expenses that aren't applicable when it comes to tax relief. These are known as disallowable expenses. Examples of disallowable expenses include business entertainment, the repayment of loans taken out personally, the depreciation of assets, drawings including payments for tax and National Insurance Contributions (NIC) fines, and costs resulting from breaking the law, charitable donations (if the charity is not registered), political donations, etc.

When starting a business, you may incur pre-trade expenses, which are costs before starting to trade. These expenses can also be claimed for tax relief if you started trading within seven years of incurring the expenses.

Managing expenses can be tricky, but with the right accounting software and advice from a knowledgeable business advisor (like us), you can track and organise your expenses effectively and make informed decisions that contribute to building a profitable business.

Article written by Rachel Stewart

Photo by Blue Leaf Accounting Ltd

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