Claiming expenses for your business – what is tax deductible?

Claiming expenses for your business – what is tax deductible?
Filing a self-assessment can be tricky, particularly if you are new to being self-employed, you may be in the dark about profits, loss, expenses and payments. Anyone who is self-employed can claim certain expenses against their taxes, but not every business expense qualifies. It’s important you know what you can claim in order for your self-assessment to be valid.
The general rule of thumb is that items which are bought for your business can be fully deducted when calculating your taxable profit, although it is very important to understand what items qualify and what do not. If you’re purchasing items which care essential for your business to run, it is likely that these are tax deductible. These items carry immediate tax relief for the full amount. Items such as machinery or computers are classes as capital assets and the rules for these differ in terms of claiming tax relief.
You may be surprised to learn what qualifies, and what does not, some of these include:
What you can claim;
• The running costs of any vehicle including road tax, insurance, repairs, petrol and servicing. This is based on the mileage that is solely for business use.
• The running costs of your business premises or the cost of your home office
• The salary/ies and benefits of your employees if you have any

What you cannot claim;

• Travelling between your home and your workplace
• The cost of buying a car or vehicle, although this could qualify for a capital allowance
• Meals apart from a reasonable amount designated for breakfast and an evening meal when on an overnight trip
• Your premises

Whilst you can’t make a claim for the initial costs of the building, improvements and alterations, such as an extension to house your “from home” business, such work could qualify for capital or annual investment allowances.

Salaries and other benefits

When self employed you can’t claim your own salary, wages or any other money that has been drawn from the business. Neither can you claim your own NI contributions or income tax, personal pension or life insurance. However, if you pay a salary to an employee or outsource contractor work, these costs can be deducted. (Don’t forget that if you do have a business that employees salaried staff, you may need to ensure you are offering an Auto Enrolment Pension)

Remember that should your calculations be incorrect, whether intentional or as a result of carelessness, the HMRC have the power to fine you. If you’re struggling to manage your business expenses, why not talk to our friendly tax advisors at Newton Magnus. We are highly experienced chartered accountants servicing Dorset, Poole and Broadstone, and can take away the stress and worry of managing your taxes!
Call us today for an appointment.