With the Self-Assessment deadline passing on 31 January, it\u2019s clear that many sole traders and business owners aren\u2019t using allowable expenses and deductions to their full potential.<\/p>\n
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When using Self-Assessment to report your taxable profit to HM Revenue & Customs (HMRC), it\u2019s important to remember that not all your profits are taxable.<\/p>\n
There are inevitably costs associated with running your business, which can be deducted from your total turnover to work out your taxable profit.<\/p>\n
For example, if you have a turnover of \u00a350,000 and claim \u00a35,000 of allowable business expenses, then you\u2019ll only pay tax on the remaining \u00a345,000.<\/p>\n
Some deductions are well known as common business expenses, such as office equipment, staff costs, rental, utility and insurance bills and stationery.<\/p>\n
However, some are less widely known and may mean that you aren\u2019t using allowable expenses to their full potential.<\/p>\n
As the next financial year fast approaches, the following are five allowable expenses that all business owners should understand and use if applicable.<\/p>\n
Training costs<\/strong><\/p>\n Certain training costs are accepted as allowable expenses, but they should be approached with caution.<\/p>\n Training courses or other provisions which help you improve or refresh the skills you use in your business, such as top-up courses to learn about new developments in the industry, can be claimed under Self-Assessment rules.<\/p>\n What cannot be claimed for are course costs which help you start a new business or expand into a new area of business through your existing operations.<\/p>\n Clothing<\/strong><\/p>\n Clothing is another deduction that can present confusion, so you may have been reluctant to use it in the past.<\/p>\n You are allowed to claim expenses for certain items of clothing that you use for your business, including uniforms, necessary protective clothing and costumes (if relevant to your work).<\/p>\n Bear in mind that you can\u2019t deduct the cost of regular clothing, even if you wear it for work. This is not classed as a strictly business expense.<\/p>\n Subscriptions<\/strong><\/p>\n If you provide yourself or an employee with a subscription to trade journals or membership to an industry organisation that is related to your business, you can claim this as a business expense.<\/p>\n You can\u2019t claim for certain other regular payments, however, including payments to political parties or non-business benefits to staff, such as gym membership fees.<\/p>\n Marketing<\/strong><\/p>\n An integral part of your operations and growth, certain marketing expenses can be deducted from your pre-tax profit.<\/p>\n For example, if you choose to have a new website built and hosted externally, or place an advertisement in your local newspaper, this can be deducted as an allowable expense.<\/p>\n Certain marketing avenues, which tend to be of a higher cost and aren\u2019t seen as a \u2018necessary\u2019 business expense cannot be deducted. This generally includes event hospitality and entertainment for clients or customers.<\/p>\n Interest and overdraft payments<\/strong><\/p>\n If you incur bank costs such as credit card charges, interest or overdraft charges through the running of your business, you can claim these as expenses.<\/p>\n This includes leasing payments, interest and bank loans and alternative finance arrangements.<\/p>\n It\u2019s important to note that, if you use cash basis accounting, you can only claim up to \u00a3500 in interest and bank charges as allowable business expenses.<\/p>\n Claiming allowable expenses<\/strong><\/p>\n In the course of your accounting period, you should keep records of all your expenses, such as receipts, invoices and purchase orders.<\/p>\n When you file your next Self-Assessment return, you should add up all your allowable expenses for that year and list them on your submission.<\/p>\n You will then be taxed on only the taxable portion of your profits.<\/p>\n While you don\u2019t have to send proof of expenses with your Self-Assessment return, you may be asked to show proof to HMRC, so keep them to hand.<\/p>\n For help making the most of allowable business expenses, get in touch with our team. <\/strong><\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" With the Self-Assessment deadline passing on 31 January, it\u2019s clear that many sole traders and business owners aren\u2019t using allowable expenses and deductions to their full potential.<\/p>\n","protected":false},"author":1,"featured_media":2557,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11,89,17,27,49,13],"tags":[],"yoast_head":"\n