What are business related expenses used for?
Business related expenses are specific expenses that you can subtract from your taxable income, thus reducing the amount of income that is subject to taxation. By identifying and utilizing eligible deductions, you can lower your overall tax liability and keep more money in your pocket. From business expenses to charitable donations, various items can qualify as deductions, providing you with valuable opportunities to save on taxes
What criteria must an expense meet to be eligible for claiming (considered allowable expense)?
For an expense to be considered allowable, it needs to meet two criteria: it must be necessary for running the business and used exclusively for business purposes.
Being necessary for running your business implies that the items are essential for conducting day-to-day operations, while being used exclusively for business means that the items are solely used for business purposes, with any personal use not permitted and therefore should be subtracted from the cost.
What can I claim?
Essentially, any purchased item can be claimed if it meets the specified criteria. Here is a list of potential expenses that may be eligible:
Office space, property, and equipment
Car, van, and travel costs
Clothing expenses
Staff-related expenses
Goods for resale
Legal and financial expenditures
Marketing, entertainment, and subscriptions
Training programs
However, each item is subject to additional restrictions and guidelines. For instance:
Some equipment may be considered regular expenses, while others could be classified as capital expenses, depending on your accounting method
Certain vehicles (vans) might be viewed as regular expenses, whereas others (cars) would be regarded as capital expenditures
Protective gear is an allowable expense, but regular clothing is not
While financial costs are generally acceptable, there are limits on the amount you can claim
Training courses must meet specific criteria to be considered allowable, such as being directly related to the services you currently provide (e.g., refresher courses, First Aid, Health and Safety, etc.). However, any training that enables you to offer an additional service would not be allowable.
Understanding the complexities of business-related expense regulations can be challenging and time-consuming. Nevertheless, these rules are crucial for your business and will impact your tax obligations.
How can T.A.C.S. can help you navigate the intricacies of the business related expenses?
Your dedicated Account Manager is an AAT Licenced accountant with expertise in assisting individuals registered for self-assessment across various industries, including construction workers, security guards, cleaners, taxi drivers, delivery drivers, personal trainers, high earners, traders, and more.
Whether you begin with the UTR application process or proceed directly to the Self Assessment stage, you will undergo an initial consultation to review your situation. During this consultation, you will receive guidance on allowable expenses, the necessary documentation for expenses, and a discussion on applicable flat rates tailored to your specific circumstances.
Conclusion:
Business-related expenses play a crucial role in reducing tax liability by serving as deductions from taxable income. It is essential that these expenses are necessary and exclusively for business purposes to be eligible for deduction. Allowable expenses encompass a wide range such as office space, travel costs, staff-related expenses, and more, as long as they meet specific criteria. Having a clear understanding of these regulations is imperative for effectively managing tax obligations. T.A.C.S., with AAT Licensed accountants, provides tailored guidance on allowable expenses and necessary documentation for individuals across various industries, ensuring compliance with tax laws.
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