Posted: 10. October 2019 by: Rupert Tennant

What Business Expenses You Can Deduct

What Business Expenses Can You Deduct

sesauer October 10, 2019

Taxes are the biggest expense for a small business. That’s partly because it’s not a small expense and partly because it’s an expense that you can’t negotiate about and that needs to be paid on time and in an orderly way.

That’s why it’s essential for a small company to know where and when they can lower their tax-related expenses. One of the ways to do so is to deduct business-related expenses from your overall tax bill. An accountant can help you figure out what those expenses are.

Accountancy fees

An accountant is one of the most important employees you could have, and their work is essential for your business finances. It can save you quite a lot of money just by knowing the tax code, and it can get you out of the problems with the government.

The fees related to accountancy are therefore considered to be a business expense, and they are deductible from your tax. When the owner’s personal finance overlaps with those of the business, the work on the personal part will be treated as if the company provides you with a benefit in kind.

Business travel

A business needs to take on at least some amount of travel early on, and that can be quite a burden for it. However, since it’s the only way to network and mingles with others working in your field, it’s an essential company expense.

These expenses could be deducted, but it’s important to know that HMRC takes these seriously and will notice if you’re trying to sneak in some expense travel and hotel fees in your business expenses. This is not the path a new business wants to go down.

Cars and vans

Similar rules apply to having a company car or a van since it’s an expense that’s needed to run the day to day operations of many businesses. There are 3 rules you must follow if you want this expense deducted from your taxes. These are:

  • The business pays for the company car.
  • The travel you take is needed for work purposes.
  • The travel can’t be your ordinary commute.

The additional expenses needed to run a car are also deductible. These include vehicle insurance, repairs, maintaining costs, fuel costs, parking expenses and all the rest that could be documented and is needed for the car itself to operate.

Charitable donations

Charitable donations given by the company are also deductible since the government wants to encourage small businesses to be active in the community and to help charities. This includes a few different types of donations, such as:

  • Money
  • equipment or stocks
  • land, property, and shares
  • employees
  • sponsorship payments

The deduction covers the whole charitable donations. This means that the amount you’ve donated is simply taken out of your yearly taxes and you pay less tax for the amount you’ve given to the charity. The charity, however, needs to be registered as such.

Equipment expenses

Equipment expenses are also deductible from your overall taxes and often for their full price. That means that you can deduct all of the equipment that you need to get the business off the ground or the costs of replacing and renewing the equipment.

There are limits to this, however. First, you’ll need to make sure that you can document these purchases and to prove that they are needed for your business when it comes to the audit. Secondly, you’ll need to keep these expenses up to a particular figure since HMRC sets the limit of how much of it can be refunded.

Disposal of fixed assets

Disposal of fixed assets is the term used for selling or destroying an asset of your company that you can no longer use. It includes only the assets that have been purchased for the company purposes only. The asset needs to be obsolete, or it can be used any more.

You’ll need to let HMRC know that this is the case if the asset was sold or when it was disposed of in some other way, and that will be reflected in your taxes for the next year.

Conclusion

Business expenses that are made for the purpose of running your company can be deducted from your yearly taxes since that’s the only way to keep your business operating without the government making it too difficult for you. These expenses need to be recorded and accounted for.

It’s also important to consult with an accountant and to use their service to be sure which of the expenses can be deducted and at what amounts. It’s a useful tool for helping small companies grow, and you should take advantage of it, even though it will require additional accounting work.