Here are eight ways to save on your tax bill.
If you’re completing Self-Assessment, you’ll need to understand what expenses you can and can’t claim for. Claiming everything you’re entitled to will reduce your tax bill. But there are a few rules to follow to ensure your tax return is compliant.
Here are a few of the expenses you might not realise you can claim. If you’re uncertain about your own personal circumstances, always talk to a tax professional, like YTO. And the good news is – as you’ll see below – that accountancy services are tax-deductable.
Let’s have a look at some of the expenses you can offset against your tax bill.
1. Legal and financial costs
If you’ve hired an accountant, solicitor, surveyor or any other professional, you can offset the expense against your tax bill. Equally, you can claim the cost of professional indemnity insurance premiums and a range of other bank and insurance costs,
Watch out for: You can’t claim any legal costs associated with buying property or machinery. However, if you use traditional accrual accounting, you can claim them as capital allowances instead. A tax accountant can give you advice on how to claim.
2. Your mortgage and utilities
If you work from home, you can claim a proportion of your gas, electric, water, broadband and telephone bills as allowable expenses. However, you must calculate what proportion of each bill applies to your business.
For example, if you work from a four-room house (kitchens and bathrooms do not count as rooms), and you use one room exclusively for business purposes, you can claim 25% of your annual bills as expenses on your tax return. The same rules apply to your mortgage interest (but not capital repayments) or annual rent costs.
If you only work e.g. one day a week or the room serves another purpose (e.g. a spare bedroom) you need to calculate the percentage of business usage associated with that room. HMRC doesn’t give us specific instructions here, so your obligation is to work out what you believe is the right proportion on a ‘fair and reasonable’ basis.
Watch out for: If you use a room in your home solely for business purposes, you will need to pay Capital Gains Tax on the part of the property used for business when you sell your home. This rule doesn’t apply if the room serves a dual purpose.
3. Council tax
Just as you’re allowed to claim the expense of a portion of your mortgage interest or rent against your tax bill, you’re also allowed to do this with your council tax. If your home office is 25% of the rooms in the property, then you can claim up to 25% of the cost of your council tax on your self-assessment bill.
4. Flat-rate simplified expenses
Simplified expenses are an easy, flat-rate deduction for sole traders and partners in business partnerships who work from home for at least 25 hours/month.
What you can claim depends on how many hours a week you work from home:
- 25 to 50 hours – you can claim a flat rate of £10 per month
- 51 to 100 hours – you can claim a flat rate of £18 per month
- 101 and more hours – you can claim a flat rate of £26 per month
The flat rate does not include broadband or telephone expenses, so you can claim these costs in addition to the simplified flat rate.
Watch out for: Make sure this is the right choice for you. If your business has low costs, this is an easy solution. But you might be better off working out the detail if your costs are higher. HMRC’s online expenses tool is designed to help you work out what’s best for you or you can ask your accountant for advice.
5. Office supplies
You can claim for your office supplies, including your mobile phone, postage, business stationery, printing costs and printer ink. You can also claim for any computer software your business uses and for which you make regular payments to renew the licence
Watch out for: There are some items, such as a mobile phone that you’ll use for both business and personal use. You can claim for the business use but if you use it e.g. 50% of the time for business you can only claim the cost on a pro rata basis.
Also consider: If you’re buying bigger items like computers, these are considered a capital expense and have different rules. Find out the rules on capital allowances.
6. Mileage costs
If you travel for business, you can claim a mileage allowance on your Self-Assessment return.
For a car or van the rates are:
- Up to 10,000 miles you can claim expenses of 45p per mile that can be deducted from your tax bill.
- From 10,000 plus, you can claim 25p per mile.
You’re also allowed to claim the business use element of vehicle insurance, repairs and servicing, fuel, parking, hire charges, vehicle licence fees, breakdown cover. You can also claim for train, bus, air, and taxi fares as well has hotel rooms and meals on overnight business trips.
Watch out for: You can’t claim for non-business driving or travel costs so again, if you’re using your vehicle for personal use, you need to work out the percentage of business usage. You can’t claim for fines even if they’re incurred during business travel. And you can’t claim travel from home to a regular place of work.
7. Unpaid invoices
This is often overlooked by sole traders, but if you are using traditional accounting, HMRC allows you to claim for bad debt – in other words, any amount of money that is included in your turnover but that you know you won’t receive.
Watch out for: This rule doesn’t apply if you use cash basis accounting. If you haven’t received the money, it won’t be included on your return. This means you have no need to claim the bad debt.
8. Marketing costs
If you incur expenses promoting your business, you are allowed to claim that cost. This includes website hosting and maintenance and the online costs you incur to promote your business.
Watch out for: You can’t claim for costs relating to event hospitality or entertaining clients, customers, and suppliers.
Summary: How to ensure you claim everything you’re entitled to
Understanding what you can claim can significantly reduce your tax bill. We’ve outlined just eight of the expenses you can claim when you complete your self-assessment. However, our specialist tax accountants can give you tailored advice. We offer you a fast, flat fee tax return preparation service that means you can relax, safe in the knowledge that your tax return will be prepared in an accurate and timely manner.
For no-stress advice on your tax return, CONTACT US today.
This article offers generalised information only and this does not constitute legal, tax, or professional advice. In all cases, you need to keep records of all of your business expenses as proof of your costs.
