Claim Your Expenses!
One of the most regular questions that we are asked from traders is about the expenses that they can claim against taxable income?
Well, in short HMRC has provided guidance that you can claim any expenses that are ‘wholly, necessarily, and exclusively’ for the purposes of your business, but what does this mean in reality?
Well, generally for traders you can claim the following items:
- Any desk fees that you may incur through trading as an arcade or a serviced office
- Any commissions, transaction or exchange fees (including any bank charges)
- Any wages that you may pay to other individuals including family members who may help in your trading activities or even administrative duties. See our other article Using Family Members To Reduce Your Tax Bill for further details on this
- Any travel* or accommodation costs that you may incur for travelling to any training courses or conferences or meetings with other associates whether in the UK or abroad.
- Any subscriptions that you may have such as Bloomberg, other financial media, or even magazine and newspaper subscriptions provided they are used solely for trading purposes
- Broadband subscriptions, particularly if they are upgraded solely for the purposes of your trading activities
- Postage or stationary costs
- Any software that you need to purchase or subscribe to if used for trading
- Any mobile phone expenses that you may incur as a result of your business activities (N.B. if you are trading through a limited company and using a Blackberry or similar, this may have other tax disadvantages).
- Contributions to an approved pension scheme
- Any assets that are required as part of your trading activity such as laptops, office equipment. Although not necessarily expenditure the full cost of the asset can be offset against profits in full in the year of purchase
* You can claim either mileage expenses travelled on business if you are trading through a limited company at the rate of up to £0.45p per mile up to 10,000 miles in any tax year and £0.25p per mile for any additional miles. Any reimbursements over and above this limit could incur additional tax bills for the individuals in question.
If you are self-employed (either as a sole trader or a partner in a business), the amount allowable for tax is based on a proportion of the total motor expenses that you incur, which will include obviously fuel, maintenance, insurance and depreciation.
Therefore, if you drive a particularly expensive or thirsty vehicle, you may find that the self-employment route may save you further tax than the employed route. However, of course we would not suggest that you choose either a limited company or a self-employment structure purely for the ownership of your car, although this may form one of the considerations when considering your business structure options.
Also, it should be noted that the above list is not intended to be exhaustive and may well include many additional types of expense provided they are incurred wholly, necessarily, and exclusively for the purposes of business.
Should you wish to discuss the sort of expenses that you could claim for your particular business structure, please contact one of our advisors.