Accountant Chat-Allowable business expenses

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Accountant Advice – What Expenses can I put through a limited Company?

We talk about expenses being below the line tax deductions, which are things that come out of your taxed income, like your food shopping and mortgage payments, and above the line tax deductions like the various costs that your business can claim for mentioned below.

Paying for the costs from your business can save 19% corporation tax along with a further dividend tax saving at 8.25%, 33.75% and 39.35% depending on your tax bracket.

The accountants at Digivolve are well versed in what can and can’t be claimed and are always keen to talk to clients about items to see if they can be claimed by your limited company.

Mileage
Mileage, is an expense that you can claim for any work related trips, perhaps meeting clients, quoting for work, training courses and visiting your accountant of course :).

Mileage can be reclaimed at £0.45 per mile up to 10,000 miles per year, after this the rate falls to £0.25 on every mile above 10,000 this is done each tax year from 6 April to 5 April.

There is also another perk to claiming mileage, in that you can also claim an element of VAT back off each claim too if you keep VAT receipts.

If you or your employees ever need to use a taxi, bus, or train to get to a client you can also claim this back through the business too.

Digivolve’s Top Tip ‘ Mileage is easy to forget as there is no expense that physically hits your bank for it, just keep a log of your client trips or speak to us about which apps can be used to help. Such as Xero mileage tracker.


Work from Home Allowance
You can also claim a “Work from Home” allowance of £312 per year (£6 per week). As well as the allowance, any laptops, equipment or furniture that you buy for your home office or work can also be put through the business as an allowable expense and if you do buy them through the business, you will also see the additional corporation tax relief.

HMRC is currently running a scheme where any office equipment, computer equipment, desks and chairs can be reclaimed at the end of the year at 130% called the super deduction long as they are brand new at the time of purchase – which means that you get an additional benefit from those purchases and a bonus reduction in company tax.

Digivolve’s Top Tip ‘ The work from home allowance is a simple method of calculating the cost of working from home – there is also an option to calculate the cost of a home office which involves calculating your bills on a pro rata basis.‘ However from our experience this is often less than the HMRC allowance, when adjusting for only the incremental cost of working from home.‍

Travel and entertaining costs
Travel and entertaining costs can also be claimed through your business for taking both your clients and your employees out for occasions. Staff entertaining is allowed up to £150 per person per year and includes both directors and employees, this can be used for a summer barbeque or party or put towards your Christmas do!

Client entertaining can also go through the business. It is important to note that although you can claim this through your business as an expense you will not be able to claim any corporation tax relief on the entertaining cost – however, this is still much more tax efficient then if you are paying for this personally after your own personal taxes.

For example to pay for a £100 meal you would typically need to take out £148.14 as a dividend form your company, pay tax at 32.5% being a higher rate tax payer, which would be tax of £48.14 to be left with £100 after tax to pay for the meal.

Digivolve’s Top Tip ‘Retaining the best staff is hard so offering events is a nice perk, we also do team building events / team training sessions which don’t make up part of the £150 limit. ‘

Trivial benefits- £50 gifts
Employers can also provide 6 x £50 vouchers themselves (and unlimited to staff but to avoid investigation may be best sticking to 6) throughout the year tax free as gifts, so long as they aren’t given in lieu of payment or work.

Digivolve’s Top Tip ‘What I do personally on this is reward myself at the end of each quarter with a £50 gift for submitting our VAT returns, then one on my birthday and one at Christmas

Employee expenses
Investing money into your employees can also be a great way to help you save on corporation tax too- allowable expenses include gym memberships and welfare costs, rewards schemes for a job well done, training costs and the cycle to work scheme. Although it is worth noting that there could be a small amount of payroll taxes to pay if you offer specific individual benefits to employees (such as; medical insurances or company cars) these costs will still help reduce what you pay in corporation tax at the end of the year.

Mobile phones
Mobile phone costs are another expense that you can put through the business- so long as the company is being billed for the costs. When the company is being billed you can then claim 100% of the cost and the VAT, compared to if you have a personal mobile phone contract where you can only reclaim an element of the cost back.

Digivolve’s Top Tip ‘The key here is being invoiced in the company name, it is worth noting at times you can pay a premium for putting through the business so important to consider this‘ it’s not worth paying 25% more to save 19% corporation tax for example.

Insurance
Insurance is another allowable expense that you can put through the business- including business car insurance, public indemnity insurance, public liability insurance, damage cover for assets, medical insurance, building insurance. If you are currently paying any of the above personally, you are missing out on additional corporation tax and national insurance relief. Some insurances such as Private Medical Insurance will need to be reported through payroll at the end of the year, but the savings are considerable compared to what you would pay in taxes personally.

Pension Contributions
You can also enrol yourself onto a payroll scheme for the year and take a wage from the business, as well as being able to put up to £40,000 a year into a company pension scheme depending on your total income for the year –
you can also make personal contributions and can speak to us about what is best in your own personal circumstances.

Digivolve’s Top Tip ‘Again this is a simple overview of pensions but due to the significant amounts you can invest it does provide great opportunities- if you have surplus cash in your business definitely one to look into” and can afford for the money to potentially be locked away in the pension until you reach retirement age.


Electric & Hybrid cars
The purchase of company cars is also a great way to save more tax- especially if you’re planning
on purchasing an electric or hybrid vehicle. Compared to petrol or diesel cars- the savings in payroll taxes for hybrid and electric vehicles result in you paying less tax as there’s less emissions from the cars and there is also the bonus addition of relief to corporation tax too. If you need to purchase charge points for your place of work, these are also allowable costs too. Car lease costs are also allowable business costs and can be put through the business but only half of the VAT can be reclaimed.


Digivolve’s Top Tip ‘If you are willing to go electric then the tax savings are significant- if you are looking at Hybrid the emissions % is based on the number of electric miles so try and find one that does over 40 miles for a decent benefit in kind percentage.

There are many ways you can claim back expenses through your business, but the above are our favourites and effective ways to save money. 

If you have any questions on the above or want a chat with a member of the team to discuss how you can be more tax efficient, please get in touch here

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