A limited company is one of the most common business structures in the UK. It has various benefits like limited liability, separate legal identity, higher credibility, increased investment opportunities, tax efficiency, and other benefits. Talking about tax benefits, limited companies in the UK currently pay only 19%\u202fCorporation Tax\u202fon profits;\u00a0this is quite on the lower side\u00a0than\u00a0sole trader\u00a0structure where one has to\u00a0pay 20-45%\u00a0Income Tax on their\u00a0earnings.\u00a0Another additional benefit is that you can\u00a0reduce your tax liability by claiming various business expenses.<\/p>\n
Let us talk about these business expenses in detail. However, you must be aware of few rules applicable to claiming business expenses. One most important rule is that you can only claim the costs you incur wholly and exclusively for your business. You could claim for only the part of the expense incurred for business purposes if the payment had a dual purpose, i.e., personal & business. You can claim business expenses that have been paid through your company account or paid by you directly that were reimbursed by the company. You can also claim expenses incurred by your employees on behalf of your company which the company later reimbursed; however, you must keep a proper record of such expenses. The best way to do so is by making a few forms and policies for reimbursement.<\/p>\n
Start-up\u00a0costs are business expenses,\u00a0and as a limited company,\u00a0you can claim\u00a0these\u00a0expenses.\u00a0However,\u00a0it might come as a surprise to many that\u00a0you can also claim\u202frelevant\u202fexpenses\u202ffor up to 7 years\u202fbefore\u202fthe\u00a0company starts\u00a0operating.<\/p>\n
This cost covers almost all\u00a0essential\u00a0expenses like \u2013 equipment, computer, software, printing,\u00a0traveling cost, and similar expenses.<\/p>\n
Starting a limited company is not a child\u2019s play,\u00a0nor is the cost involve in consulting with professionals. As a first-timer or even an\u00a0experienced\u00a0business owner, you might have to consult\u00a0a\u00a0professional to help you start with your limited company.\u00a0These\u00a0could be your\u00a0outsourced accounting services<\/a>, legal services, or any similar\u00a0professional\u00a0services.<\/p>\n Whether this cost is\u00a0incurred in starting up is\u00a0just\u00a0a\u00a0one-time\u00a0cost or an\u00a0ongoing cost, you can\u00a0claim\u00a0both\u00a0as your limited company expenses.<\/p>\n Marketing is a necessary task of\u00a0your\u00a0business\u00a0to sell your products\u00a0or services. You need to make sure your targeted audience is aware of your products and services.\u00a0Like\u00a0the\u00a0professional\u00a0fee expenses, marketing expenses,\u00a0be it\u00a0a\u00a0one-off cost or an ongoing\u00a0-charge,\u00a0can be claimed as one of your limited company expenses.<\/p>\n You can claim the expense of the rent amount incurred for your business.\u00a0It\u00a0is applicable in case you use a part of\u00a0the\u00a0property you own for business purpose. The catch, in this case,\u00a0is that you need to declare the earning from rental in your\u00a0Self Assessment,\u00a0and you must have a\u00a0rental agreement between yourself and your limited company.<\/p>\n You can make\u00a0a\u00a0claim a percentage of your household costs and utility bills as business expenses.\u00a0These costs might involve – lighting, heating, printing and postage costs and similar expenses as long as they are used solely for business purposes. You can also claim for furniture and other equipment that is used\u00a0for business purpose.<\/p>\n Working from home in most cases requires\u00a0utilising the internet,\u00a0so\u00a0the broadband cost can be claimed\u00a0as\u00a0a\u00a0business expense. If you have specifically installed new broadband for work,\u00a0you can claim the installation cost as well as the monthly rental. However, if you already had broadband in place,\u00a0then you can claim only the monthly rental and that too only on the part used for business purpose. Similar is\u00a0the\u00a0case with the phone expenses.<\/p>\n Equipment necessary for running your business is business expenses, and few examples can be computers, printers, scanners, software, stationery, and office furniture. You can claim these costs as a part of your business expense.<\/p>\n Expenses like\u00a0bank fees, overdraft charge, credit card charge,\u00a0and loan interest\u00a0charged to your business accounts\u00a0can be claimed as business expenses.\u00a0You cannot,\u00a0however,\u00a0claim for\u00a0personal\u00a0bank charges.<\/p>\n Staying up to date with industry news and update is vital for all business and in some case an essential task as it helps\u00a0business to keep track about industry trends and your competition. If you have\u00a0a\u00a0professional subscription such as magazines, journals or books,\u00a0you\u00a0will\u00a0be able to claim the cost as a business expense.<\/p>\n Additionally, if you pay for any membership, registration, or licence that allows\u00a0you to operate in your respective profession, these costs can\u00a0also be\u00a0claimed. However, they have\u00a0to be HMRC approved professional bodies<\/p>\n Any insurance policy which is strictly for business purpose can be claimed\u00a0as a business expense.<\/p>\n Few examples of these policies are Public\u00a0Liability\u00a0Insurance,\u00a0Professional Indemnity Insurance or Employer\u2019s\u00a0Liability.<\/p>\n Salary paid to employee and yourself as a director is a business expense and hence can be claimed. This cost includes\u00a0the National Insurance Contributions (NIC) cost if the salary crosses the threshold for NIC.<\/p>\n As for pension, once a contract with a pension provider is set up and you start making payments,\u00a0you will get 100% tax relief as a limited company expense. However, there is a limit of \u00a340,000,\u00a0after which pension payment becomes taxable.<\/p>\n Training your employee and yourself in regular intervals is essential for well being of your company. It helps build on the existing skill and improve your organisation\u2019s productivity. Training is an allowable expense, so you can claim the expense on training. Additionally, if you have to provide for travel and accommodation, both these costs can be claimed.<\/p>\n If you or your employee has to travel for\u00a0work (apart from the regular home to office),\u00a0you can claim the expenses incurred in these travels. These expenses can include fuel cost (if\u00a0a\u00a0personal vehicle is used), public transportation cost, parking\u00a0fees, road toll fees\u00a0or even vehicle repair and servicing. Not only these,\u00a0but\u00a0you also can claim expenses incurred on accommodation and meal in the event of overnight trips.<\/p>\n The costs of\u00a0annual events\u00a0for\u00a0your employees\u2019 entertainment\u00a0can be claimed as a business expense.\u00a0However,\u00a0there are few conditions\u00a0to claiming this expense.\u00a0The annual event must be\u00a0open to all staff members and costs less than \u00a3150 per person\u00a0annually.<\/p>\n You don\u2019t need to pay tax or let HMRC know about\u00a0trivial benefits you provide to your employees as\u00a0a gift or benefit for your employee\u00a0if all of the following rules\u00a0apply –<\/p>\n If\u00a0the above criteria are not met,\u00a0then\u00a0you\u00a0will\u00a0need to pay tax on\u00a0the\u00a0cost incurred on\u00a0gifts and benefits.<\/p>\n If\u00a0you and your employees are exposed to display screen equipment for one hour or more regularly as a part of your work, you can claim\u00a0eye\u00a0test\u00a0expense.<\/p>\n As for\u00a0glasses or contact lenses, you can claim for the expense incurred if you or your employee is\u00a0prescribed\u00a0to use\u00a0any corrective lenses for display screen work only and not general use.<\/p>\n If your employees are required to wear a specific\u00a0uniform,\u00a0i.e.,\u00a0clothing with your business logo,\u00a0then the cost of these uniforms can be claimed. Also, protective clothing\u00a0which is\u00a0utilised\u00a0for\u00a0safety\u00a0purpose\u00a0is exempt from tax even\u00a0if it is not branded with\u00a0the\u00a0company logo.<\/p>\n A charitable donation is not a necessary business expense,\u00a0but if your business has\u00a0donated or plan to donate,\u00a0you will pay\u00a0lesser tax.\u00a0A donation can be in the form of \u2013 money, product or service you provide, employee through secondment, equipment, property or shares in another company.<\/p>\n Now that we have understood about major business expenses you can claim back as a limited company, it is time you start applying\u00a0for\u00a0these tax relief in your accounting process.\u00a0Using\u00a0these tax relief and claiming business expenses will help you reduce a significant amount of your corporation tax. If you need assistance in your accounting to\u00a0help you take full advantage of this\u00a0tax relief, you can even consider hiring\u00a0an\u00a0accounting and bookkeeping services<\/a>\u00a0provider.\u00a0We will give a word of advice\u00a0\u2013 stay updated with any change of rules and always maintain an accurate record of\u00a0all expenses,\u00a0even the business pre-formation expenses.<\/p>\n","protected":false},"excerpt":{"rendered":" Many of your business expenses can be claimed, and for few expenses can claim high tax relief. Read more to learn which costs can be claimed as a limited company operating in the UK.<\/p>\n","protected":false},"author":1,"featured_media":3697,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[74],"tags":[],"class_list":["post-2930","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-taxation","entry"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.whizconsulting.net\/uk\/wp-json\/wp\/v2\/posts\/2930","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.whizconsulting.net\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.whizconsulting.net\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.whizconsulting.net\/uk\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.whizconsulting.net\/uk\/wp-json\/wp\/v2\/comments?post=2930"}],"version-history":[{"count":0,"href":"https:\/\/www.whizconsulting.net\/uk\/wp-json\/wp\/v2\/posts\/2930\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.whizconsulting.net\/uk\/wp-json\/wp\/v2\/media\/3697"}],"wp:attachment":[{"href":"https:\/\/www.whizconsulting.net\/uk\/wp-json\/wp\/v2\/media?parent=2930"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.whizconsulting.net\/uk\/wp-json\/wp\/v2\/categories?post=2930"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.whizconsulting.net\/uk\/wp-json\/wp\/v2\/tags?post=2930"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n
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