If you're a business owner, no doubt you have asked yourself - and maybe your accountant - this question.
The correct answer is - anything that is 'wholly and exclusively' for the purposes of your business can be 'put through' and therefore qualify as a tax deduction.
The obvious ones you are probably already capturing, however there's a few outlined below which you may not be fully claiming:
- Your home expenses - as business owners we have a hard time switching off. That means there will inevitably be time in the week when work is done at home - be it checking and responding to emails, working on the books, taking calls, storing records etc etc. You therefore should be able to claim a proportion of your home running costs i.e utility bills, council tax, mortgage interest, broadband etc against your company's profits. What's more this amount can be taken tax free from your company as you will already have borne the cost personally so there's a double saving.
- Travel - there are so many travel expenses that go unclaimed mainly due to the effort of not being able to keep proper records. The taxman offers a very generous 45p a mile as reimbursement (tax free!) for using your own car for business purposes. Although home to work is excluded, any other travel e.g visiting suppliers, going to the post office, visiting your accountant (!) etc would all be allowable. Try using an app such as MileiQ which automatically tracks all your journeys in the background and you then just have to swipe whether its business or personal. That way it's easy to keep records and make sure you don't miss out on tax free cash.
- Business class discount - there is nothing that says you can only claim the cost of a business trip if you fly economy! When looking at the upgrade cost of flying business, factor in a discount of up to 40% as that is the amount of tax relief you could get which may justify the cost. No doubt the additional work done on the journey will make it worthwhile.
- Subsistence - where you are travelling on a business trip and away for more than 15 hours from home you can claim a subsistence allowance of £25 per day based on HMRC's approved rates. For shorter business journeys involving at least 5 hours away an amount of £5 without receipts can be claimed. These are all tax free and add up.
- Payments to your own pension - if you're like most business owners and take your drawings via a small salary and the rest as dividends you will be limited as to how much you can put into your own pension. This is restricted to your salaried earnings i.e dividends are excluded. However, your company can pay into a pension for you and so long as this is less than £40,000 per year, it is not restricted to how much salary you take.
The above are clearly not an exhaustive list but a few of the most common ones that we see business owners sometimes miss out upon. Have you fully claimed your entitlement to reduce your tax bills as much as possible?
If nothing else, make sure you ask this question of your accountant next time you sit down to go through your accounts and tax return!
Happy tax saving!