The question accountants are asked most is, ‘What expenses can claim tax back on in our business?’ Here’s what you can claim for, says Zad Butt of Hillier Hopkin

As an accountant, the question I get asked the most is, “What expenses can we put down when it comes to claiming back tax on our business?”. As businesses emerge from the global pandemic and adapt to new ways of working, it is even more important to know what you should be able to claim tax relief on within your business.

When looking through your bank statements to see what expenses you could use when it comes to claiming back tax, the main rule to follow is the “wholly and exclusively rule” which can be applied to self-employed, partnerships and limited company businesses alike. If the expense has been incurred wholly and exclusively for the trade or profession you are in, then you should be able to claim a deduction against your business profits and reduce the amount of tax or national insurance that you would need to pay.

You should be able to easily identify these expenses and they are often the same expenses that you would claim year on year.

For self-employed and partnership businesses, there are expenses that can be claimed which often get missed where there may be some personal elements, for example, working from home or using your car for business journeys. For those with a limited company, expenses with private elements can be claimed as an employee, with the company reimbursing you and then claiming a deduction in its annual accounts.

For self-employed and partnership businesses claiming back tax, expenses with personal elements need to be apportioned on a just and reasonable basis. For example, hours spent working from home and size of your home office, or number of business miles over the total mileage you have done in a year in your vehicle.

If you work from home, you may be able to claim a proportion of your costs for the following things:

  • heating
  • electricity
  • Council Tax
  •  mortgage interest or rent

If you are using your private vehicle in your business then you can claim the business proportion of your motor running expenses each year, including fuel, repairs, road tax, MOT and insurance. You can also claim capital allowances on the value of your private vehicle when you start to use it in the business. The rate of capital allowance for cars is determined by the CO2 emissions of your car and this will be either 18 per cent or 6 per cent each year on a reducing balance basis. For cars with zero CO2 emissions figure, i.e. fully electric cars, the capital allowances rate will be 100 per cent. Of course, capital allowances for all private vehicles will also need to be adjusted for the private use percentage as well.



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