Limited companies must pay the right amount of tax each year to avoid HMRC fines and penalties. In the same way that it’s crucial to avoid underpaying taxes, it’s crucial for businesses to avoid paying taxes on their tax-deductible business expenses.
Limited companies and small businesses can save a sizable amount of money each year that can be reinvested in the business by being aware of which business purchases are tax deductible and tax free.
What constitutes a tax-deductible expense, how to claim expenses, and five items that you probably didn’t know were tax deductible are all covered in this article.
What is a tax-deductible expense?
Expenses that are legally allowable deductions from your overall earnings are known as tax-deductible expenses. As a result, tax-deductible expenses lower taxable income and hence lower the total amount of income tax due.
According to HMRC, you can deduct any business expenses from your profit before tax if you run a limited company. Any benefit you receive from the company that you utilise yourself must be disclosed.
The five expenses you didn’t know might be deducted from your taxes
Office supplies, mileage, and business equipment are just a few of the frequent tax-deductible expenses for limited companies. Are you aware that there are a lot more costs that you can deduct from your income tax?
Here are five company expenses you didn’t know might be deducted from your taxes:
Although your business cannot deduct expenses for clothing that may be considered a “everyday wardrobe,” it may be able to do so for uniforms, protective gear, and any other attire worn only for work. Any additional cleaning or repair expenses are also taken care of.
The majority of uniforms and attire used for work are exempt from taxation; nevertheless, as an employer, you may still be required to declare these costs to HMRC. It’s critical that you accurately pay and report your expenses.
It’s good news that your limited company can deduct the cost of its holiday or yearly party!
Your social gathering is completely tax-exempt as long as it is an annual event (such as a Christmas party or summer barbecue) and is available to all employees. If these conditions are met, you don’t even need to file any paperwork with HMRC.
This also holds true for virtual and online gatherings.
In general, office upkeep, repairs, and redecoration are all deductible from income as long as they don’t constitute a larger improvement project. It’s possible that the charges of a painter, decorator, paint and wallpaper, as well as tools like paintbrushes, will be considered permitted expenses.
If you work from home, you might be eligible to deduct a part of necessary home improvements and repairs that are made solely for business-related purposes. It could be better to talk to an accountant if you’re unsure.
The workplace nursery is probably tax-exempt if you’re a company who offers childcare to your staff.
According to HMRC, “if you offer places for employees’ kids in a work nursery, it must meet the following requirements to be exempt:
- Have the necessary registrations and registrations
- Be accessible to all staff
- Offer child care for your employee’s kids or the kids they’re responsible for
- Offer daycare up to the oldest age permitted by its registration and approval.
The nursery need not be located at the place of employment to qualify.
You may be aware that certain travel and mileage expenses are tax deductible, but did you know that you can also deduct spending for accommodation, meals, and beverages when you’re away from your regular place of employment?
When you cannot claim tax relief for travel to and from work, you can do so for expenses such as those incurred for meals, accommodation, tolls, parking, public transportation, and hotels when on business trips.
How to make tax deduction claims
You must maintain track of your business expenses and be prepared to prove that they were made entirely and exclusively for company performance in order to claim the proper tax deductions.
We would be more than happy to demonstrate the advantages of using powerful cloud accounting software like Sage’s Intacct and how Itas Solutions can assist you and your organisation with accounting – and keeping track of expenses.
Itas Solutions started off serving one client in 1995 and now services over 200 businesses across the UK. We are always available to assist our clients.
Itas is a business that our customers have trusted for more than 20 years, and we have expanded thanks to recommendations from them and IT professionals who value our educated but personalised service.
To discover more about how Itas can help your business with finance automation, Sage implementation, and increased purchasing management, contact us at [email protected], phone us at +44 (0) 1824 780 000, or send an email.