Tax Deductibles That You Probably Didn’t Know About

When it comes to the time when you need to go through your yearly expenses and declare your taxes, every penny counts, which is why it is imperative that you understand all the expenses and purchases that are tax-deductible, in order to lower your overall tax in an efficient way. Here is a list of just some of the tax deductibles that you might not have considered.

What are tax-deductible expenses?

You can claim tax relief for the amounts you’ve paid out, if:

• You have paid the expenses yourself without any reimbursement
• Your employer reimbursed the expense but you were taxed on the reimbursement

It is important to distinguish that the tax you’d usually be charged on an applicable item will be removed. This is not the same as getting an item for free. As a rule of thumb, you are only allowed to claim costs for specific items or services that you have bought “wholly and exclusively” in relation to your job.

Transport Costs

It is important to keep a record of any travel expenses directly related to your work. Whilst this does not include the commute from your home to work, other work trips, such as travelling to a meeting, or having to hire a car can be tax-deductible. It is not just limited to the cost of fuel either, the claim can also cover parking charges, breakdown cover, and any associated hotel or food costs if the travel involves overnight stays.

It is not just company cars that are applicable. If your personal car is used to go to meetings or used for other business purposes, then you can still claim. Just keep track of the mileage up to the HMRC-approved mileage allowance, which is set at 45p per mile for the first 10,000 miles and 25p per mile for 10,000 miles and over.

Director’s Phone

Most business owners can spend a large amount of time on the phone, dealing with customers or suppliers. If you regularly use your phone for work purposes, you will be able to claim the expenses for business calls made on either landlines or mobile phones. To do this, you will need the phone contract to be in your company name or all business-related calls will need to be recorded to claim for calls from landlines. For mobile phones, the contract will need to be in the company’s name and if personal use is kept to a minimum, you should be able to deduct the whole cost of the contract.

Professional Subscriptions 

Professional subscriptions should be included in your expenses as they can be either fully or partially tax-deductible. These may include Microsoft or Adobe packages, subscriptions to professional journals or magazines, or professional organisation memberships. If they have a direct impact on a business and help the individual carry out their work, then they should be applicable. Other memberships such as gym memberships will rarely be tax-deductible unless they can be directly related to the business and are essential for work to be carried out.

Staff Parties

As long as the parties are not too extravagant or happen on too regular a basis, staff parties such as Christmas parties or annual dinners can be tax-deductible. As long as the cost of the parties is limited to around £150 per head or less and only takes place once or twice a year, then you should be covered.

Household Bills

If you are working from home, you may be able to claim tax relief on some of the expenses incurred as a direct result of working from home, such as heating, lighting, and telephone costs. You are unable to claim for things that are related to both personal and work use – such as broadband access or rent. This is only applicable if you must work from home. If you work from home voluntarily, you are unable to claim tax relief on what you’ve spent. However, your employer may still choose to contribute towards your expenses, but this is not something they are obligated to.

Charitable Donations 

If your company is donating money, shares, employee time, or sponsorship payments to charity, they are applicable to tax relief. If you are a limited company, these amounts that are donated can be deducted from your taxable profit, which in turn can lower the amount of Corporation Tax owed. Alternatively, if you are a sole trader or individual, these charitable donations are tax-free. You just have to ensure records are kept of all your donations. It is important that if your business is making regular charitable donations, that they are discussed with your accountant to ensure the tax benefits are maximised.

Other deductible expenses

Here is a list of other tax-deductible expenses. Whilst it is not an exhaustive list, it can help you understand which items you can legitimately claim for:

• Accounting fees
• Computers and tech supplies
• Furniture or fixtures
• Equipment repairs
• Mortgage interest rates on business property
• Sub contractors
• Video equipment

Expenses errors or missing out 

A problem some businesses face is that they assume that all expenses can be classed as legitimate which is not the case. A popular example is extravagant work lunches. It is within the taxman’s right to refuse a claim or a meeting taking place in a Michelin star restaurant if the same meeting could have taken place over coffee.

Another mistake that can be made is businesses failing to make legitimate claims because they assume they are not eligible. For example, if a purchase has been made on a personal credit card as opposed to a business card this doesn’t mean you cannot claim.

These are just some of the purchases that your company might not have known were tax-deductible. Although keeping track of these expenses and declaring them correctly can be a time-consuming and sometimes laborious task, it can save your business a substantial amount on your taxes.

To ensure your company is making the most effective decisions when it comes to your business finances and taxes, get in touch with a member of the Wright Vigar team who will be able to go through all tax deductibles applicable to your business to ensure you save as much as you can.