It is all so easy when you are employed. You get paid and someone else calculates your tax and National Insurance. When you are self-employed though it is down to you to register as self-employed, ensure you are paying your National Insurance and then keep your books up together in preparation for your annual tax return submission. That is why it is so important that you know what you should be claiming for. So many people aren’t fully aware of how much they could save in tax when they start out in business and end up paying more than they should.
What is a tax deductible expense?
If you buy something for your business then as a rule of thumb you can deduct the cost of that item from your taxable earnings. If it is a capital asset however like machinery then different tax rules apply.
We explore 10 tax deductible business expenses. Just see how much you could save!
Your vehicle! The servicing, repairs, car tax, insurance and petrol are all tax deductible expenses although you can only deduct the amount you actually use for business. The cost of the car itself can be claimed for under different rules but finance can be claimed against. If you use the car for business 80% of the time then 80% of the costs are tax deductible. When you sit down and work out how much this all costs it soon mounts up.
Other travel costs – as well as a car you may sometimes need to take a train or taxi, these are also tax deductible.
Your business premises – the cost of running your business premises or your home office are another tax deductible expense. With a home office the proportion of costs that are for business purposes are tax deductible. These include heating, electricity and gas council tax, mortgage interest or rent and internet and phone usage. This is one allowance that many miss but another example of where you can save a substantial amount.
Employee costs – their salaries and other benefits or sub-contractor costs.
Advertising and marketing – websites, newspaper advertising, magazine advertising, sponsorship, online advertising and other form of advertising and marketing including signage and company POS equipment.
Stationery – as well as pens, paper and other stationery equipment you can also claim for printing, ink, computer software that is used for less than two years.
Shipping costs – if you are an online product based company this is especially important to you as postage and shipping costs are tax deductible. This could be a big cost if you are shipping large volumes of products.
Clothing expenses – as well as company uniforms any branded company clothing is a tax deductible expense.
Stock or other materials used to make products.
Communications – Your mobile phone bill and home phone bill as well as your internet charges are expenses that are tax deductible. If your phone bill is £100 per month and £70 of this was used for business whilst £30 was used for personal use the £70 is a tax deductible allowance.
There are other business tax deductible expenses and a good accountant will be able to advise you on which apply to you and your business. It is always advisable to check if you are unsure and you should always be able to provide proof of these expenses so make sure that you keep your receipts and have a system for organising them. Perhaps you could file them by month or categorise them into one of the ten fields above for easy reference.
Please note: this is for UK based businesses only please check for your own country