Being able to make extra savings will be hugely beneficial to your small business. One of the advantages of running a small business from home is that you could be able to claim additional tax deductible business expenses. Here we look at four of the most valuable.
You can claim for most ‘revenue’ expenses, which includes the day-to-day running cost of the property—however you can’t claim for ‘capital’ expenses, like your property or computer equipment. Working from home means a significant portion of your heating and energy bills are used on running your business. Thankfully, these bills can be included in tax-deductible costs, however you can only claim back the percentage of your house that your working area occupies.
To calculate how much you can claim, you will need to work out the proportion of your home’s floor space that your working area takes up, and claim back this percentage of your energy bills.
Maintenance and repair costs for your heating system can also be claimed back, as it counts towards the day-to-day running costs of your property. These costs can include having your boiler serviced in order to keep it working efficiently; boiler experts LS1 Boiler Installation recommend having your boiler serviced annually, in order to keep it running at its highest efficiency. This can save money on bills, as well as flagging up any issues with the boiler itself, which may cause it to break down and interrupt your working day.
New computers and office equipment can be deducted
If you need to set up your home-working space with a new computer, desk, chair, printer, and any other office furniture, you can deduct the cost of the ‘plant and machinery’ equipment. The cost of this equipment should be deducted prior to working out the company’s Corporation Tax bill—as long as the equipment is purchased in the company name. It’s also a good idea to keep hold of the receipts and invoices of your purchases, just in case HMRC ask for proof.
Business owners are able to claim these deductions under the Annual Investment Allowance (AIA), which was increased from £25,000 to £200,000 on January 1 2016. The AIA is simply a way to claim tax relief on assets bought by your business, and is considered to be a kind of capital allowance. However, you cannot claim the full value of items you also use outside of your business if you’re a sole trader. For example, if you buy a laptop for £500 and spend half the time using it for personal browsing, this reduces the amount of capital allowance you can claim by 50%.
Telephone expenses, including mobiles and business lines
You can use your home phone or mobile to make business calls, and have those calls be tax deductible. However, you will have to be able to make it clear which costs have been incurred for those calls. If you are using your own phone, and not one registered to your business, then all other costs related to the phone, be it line rental or repairs, will have to be charged to you personally.
What you might want to consider, if you do want to get your line rental and business phone to be tax deductible, would be to get a second phone line installed under your businesses name. HMRC stipulates that there must be a real need for this for it to be deductible. If you are taking daily calls then you’ll be on the safe side but if you only need to make occasional calls to clients, then you’re better off using your own line.
If you want to benefit from tax-deductible broadband, it’s a good idea to have the contract set up in your limited company’s name in order for it to qualify as an allowable business expense. In this case, HMRC will accept that there may be some personal use with the internet usage.
Magazine subscriptions and books can be tax-deductible
As long as your magazine subscriptions, books, or professional journals are relevant to your business, and they can help you do your job, you can reclaim tax. For example, if you’re a marketing consultant, you’ll be able to reclaim tax on a weekly copy of Marketing Week or a subscription to the Journal of Marketing. You will also be able to reclaim the tax if you buy a copy of “Permission Marketing” by Seth Godin. However, according to the latest government release, you can’t claim tax back on fees paid to professional organisations not approved by HMRC. You also cannot reclaim tax on lifelong membership subscriptions.
While you may not consider this to be a major expenditure, small businesses can find themselves saving around £80 a year on weekly magazine subscriptions and business books bought throughout the year.