This article first appeared in the Staffordshire Newsletter as a guest column written by Rebecca Nott Senior Manager.
If you are in business – whether self-employed or heading up a company – you may have an idea of the kind of activity that HM Revenue and Customs (formerly known as ‘the taxman’) allows you to put through as a legitimate business expense and some of the tax reliefs available to you.
However, as we have seen in various news stories recently, what you think you can claim and what you actually can aren’t necessarily the same and it’s important to know the difference so that you don’t inadvertently break the rules.
Here are just a few facts that you might not be aware of:
- Business mileage allowance – if your employer pays you less than the HMRC approved rate you can claim tax relief on the difference. The approved rates are 45p per mile up to 10,000 miles and 25p per mile above that. You can also claim an extra 5p per mile if you take a passenger on your business journey.
- Uniforms – if you wear a uniform at work and have to wash, repair or replace it yourself you may be able to claim tax relief back.
- Use of home – if you work from home you may be able to claim a proportion of your costs for things like heating, electricity, water, council tax, telephone and broadband.
- Bank and credit – allowable expenses include bank, overdraft and credit card charges as well as interest on bank and business loans, hire purchase interest and leasing payments.
- Marriage allowance – You can transfer 10% of your personal allowance to your husband, wife or civil partner if they earn more than you, providing that your income is below the personal allowance and your partner’s income does not exceed £45,000.
- Staff socials – if you treat your staff to a meal you can claim the VAT back as well as putting the cost through as a tax deduction.
On this last point, it is worth noting that if you are a sole trader and you take your partner out for lunch to celebrate some business success you may not be able to put this through as tax-deductible. This is because the costs must be “wholly and exclusively” for the purpose of the business. HMRC assumes that people would need to buy lunch anyway so it is questionable to put such costs through as a legitimate business expense. If the meal is classed as part of a director’s payment (or “remuneration”) then it will be liable to tax and national insurance deductions. The director can, however, increase the dividends they take out of the business and use this to pay for their own lunch.
The exception to this rule – and there are always exceptions – is that if you want to hold a party for your staff you are allowed to spend up to £150 each (inclusive of VAT) for yourself and your employees and this will be tax-deductible, without any personal taxation or national insurance issues.
Still confused? If so, call us on 01785 243276 and we’ll do our very best to help.