Introduction
This is one of the questions we are asked most often by our clients so we thought it would be a useful topic for a blog!
Managing business expenses is crucial for the financial health and sustainability of any company. Allowable business expenses are typically those incurred wholly, exclusively, and necessarily in the performance of your business duties and we have listed these below.
As an aside, if you are starting a business, it is very important to categorise your expenses properly. This will enable you to really keep a handle on your costs and identify any areas of spend where you might be overspending in order to maximise your profitability.
Comprehensive list of business expenses you can claim
Operational Expenses
These are the costs incurred in operating your business such as office space and the utilities for that office such as IT/Phone, electricity, water and heating (if you rent a serviced office, these are usually all included in the rent charge). These expenses also cover business-related phone bills (landline and mobile) and anything else you use to do your job such as stationery and printing costs.
Equipment and Depreciation
Linked closely to operational expenses are any larger, more expensive items of equipment such as computers, furniture and other higher value office equipment such as colour printers. These are assets and therefore you should account for their depreciation in your financial statements.
Travel and Subsistence
You can claim for business travelling costs such as flights, train tickets, taxis, and mileage for business trips. You can also claim any accommodation costs incurred during business trips and the costs of any meals consumed while on business travel or during business meetings.
Professional Services
Any professional services you require in the running of your business are permitted, such as legal services directly related to your business activities, and accounting fees for any bookkeeping, auditing and financial advice specifically for the business. You can also claim for any consultants you appoint to support your business.
Marketing and Advertising
Marketing and advertising costs are allowable, such as the build and ongoing management of a company website, management of your social media channels and traditional or digital advertising that you do. Other promotional materials such as business cards, brochures, roller banners, etc. are also justifiable business expenditure. The costs of taking part in trade fairs or exhibitions, including the associated expenses, are also allowable.
Employee Expenses
These can often be the most significant expenses of a business and include all salary and wage payments, including bonuses, any pension contributions you make to employees, as well as any courses and certifications for employee training and development.
Insurance and Licenses
Under this category you will have your business insurance policies such as public and employee liability, professional indemnity, any property insurance policies such as contents or buildings if you own a business premises, and other business-related insurances. You might also have licenses and subscriptions that you require for the business such as professional licenses, software subscriptions, and industry-related memberships.
Financial Charges
Financial charges include any fees for business bank accounts and transactions, as well as any interest Payments for any business loans and credit cards.
Miscellaneous
Here you could include any research and development costs, i.e. those associated with innovation and development of new products or services.
You can also categorise any client entertainment under ‘Miscellaneous’. This is for costs incurred when entertaining clients (subject to specific regulations and limits).
There are further specific rules and Regulations to be aware of, including the following:
Home Office: If you work from home, you might be able to claim a portion of your home expenses, such as mortgage interest, rent, utilities, and internet.
Vehicle Expenses: If you use your personal vehicle for business purposes, you can claim a mileage allowance or actual vehicle expenses proportionate to business use.
Staff Benefits: Certain employee benefits can be claimed, but they must align with the company’s policies and tax regulations.
How we can help
Appointing an accountant is an important step for anyone running their own business. If you are a limited company director or sole trader and need help with any aspect of your financial reporting, please don’t hesitate to contact us.
If you are looking to start a business, we offer a no-obligation initial informal discussion so that you can decide whether we could be the right fit for you. Click here for contact details or to book a discovery call: https://smartaccountantssussexandsurrey.co.uk/contact-us/