5 Purchases you didn’t know were tax deductible

Keep reading to find out five business purchases you didn’t know were tax deductible.

It is important that limited companies pay the right amount of tax each year to avoid fines and penalties from HMRC. Just like it is important not to underpay tax, it is also important that businesses do not pay tax on tax-deductible business expenses.

Knowing what business purchases are tax deductible and exempt from tax can help limited companies and small businesses save a significant amount of cash year that can be put back into the business.

This blog will mention what is a tax-deductible expense, how to claim expenses, and five purchases you didn’t know were tax deductible.

What is a tax-deductible expense?

Tax-deductible expenses are expenses that you can legally deduct from your total profit. Therefore, tax-deductible expenses reduce the taxable income and the amount of income tax owed.

According to HMRC, if you operate a limited company, you can deduct any business costs from your profit before tax. You must report any item you make personal use of as a company benefit.

What are the benefits of a tax-deductible expense?

The Government know that for businesses to make money, businesses need to spend money.

So, they offer tax deductions to:

Help Businesses Grow:

If businesses can save a little money on taxes, they might have more money to buy new tools, hire more people, or make even bigger and better products!

Encourage Smart Spending:

The government wants businesses to spend money on things that help them do their jobs better. So, they give tax deductions for items such as  computers, supplies, and learning new skills.

Make Things Fair:

It wouldn’t be fair if businesses had to pay a lot of taxes on money they had to spend just to run their business. With this in mind, tax deductions help make things a little fairer in the business landscape.

So, basically, the government offers tax deductions to help businesses succeed, which in turn helps everyone!

Five purchases you didn’t know were tax deductible

There are many common tax-deductible expenses for limited companies including office supplies, mileage costs, and business equipment. id you know there are many more allowable expenses that you can claim against your income tax?

Here are five business purchases you didn’t know were tax deductible:

Clothing

Although your business cannot claim tax relief for clothing that could be part of an ‘everyday wardrobe’, it could benefit from claiming business expenses for uniforms, protective clothing, and any clothing solely worn for work. Additionally, any cleaning or repair costs are also covered.

As an employer, even though you do not have to pay tax on most uniforms or clothing worn for work, you may still have to report these expenses to HMRC. It is important you pay and report your expenses correctly.

Parties

Good news- your limited company can claim its festive or annual party as a deductible expense!

As long as your social party is open to all employees, is an annual event, such as a Christmas party or summer barbeque, and costs £150 or less per person, your party is totally tax-exempt, and if you meet these criteria, you don’t even have to report anything to HMRC.

This also applies to online and virtual parties.

Decorating

Generally, office maintenance, repairs, and redecoration are all allowable tax deductions as long as they are not part of a bigger project for improvement. The costs of a painter, decorator, materials such as paint and wallpaper, and equipment such as paintbrushes are likely to be allowable expenses.

If you work from home, you may be able to claim a proportion of relevant property repairs and any home improvement purchases that are wholly and exclusively for your professional duties. If you aren’t sure, it may be best to speak to an accountant.

Childcare

If you are an employer and provide childcare to your employees, the workplace nursery is likely to be tax-exempt.

HMRC say that ‘if you provide places for employees’ children in a workplace nursery, to be exempt, it must:

-have the appropriate registrations and approvals

-be available to all your employees

-provide childcare for your employee’s children or children they have parental responsibility for

-provide childcare up to the maximum age its registration and approval allows for’

To qualify, the nursery does not need to be at the workplace.

Travel

You may already know that mileage and some travel expenses are tax deductible, but did you know any accommodation, food, and drink costs you incur while away from your permanent workplace are tax deductible too?

You cannot claim for travel to and from work but you can claim tax relief on money you’ve spent on public transport, hotel accommodation, tolls, parking, business calls, and food while away for business purposes.

How to claim tax deductions

To receive the correct tax deductions, you must keep records of your business spending and be ready to justify that they were purchases made wholly and exclusively for business performance.

Whether you need to report your tax deductions to HMRC depends on a number of factors. To make sure you take the correct and necessary steps, speak to an accountant.

At React Accountancy, our expert accountants ensure you are in the best hands so you can trust your accounts are being taken care of and you will never pay more tax than required. For more information, or to discuss how our accounting services can benefit your limited company, get in touch today.

We provide our services across Manchester, Stockport, London, Birmingham, Cardiff, Bristol, Glasgow, Leeds, Nottingham, Leicester, Edinburgh, Sheffield, Bradford, Coventry, Liverpool and Belfast.

Who can claim for tax deductions?

If you fit into the any of the below criteria, you can claim for tax deductions:

• If you’re running a business, big or small, you can usually claim tax deductions.

• If you work for yourself, such as a freelance artist or a writer, you’re “self-employed.” This means you can claim tax deductions!

• People with specific job expenses. For example, some jobs need you to buy your own tools or safety equipment. In some cases, you can claim some of these expenses.

Why choose React Accoutancy?

At React Accountancy, our expert accountants ensure you are in the best hands so you can trust your accounts are being taken care of and you will never pay more tax than required. For more information, or to discuss how our accounting services can benefit your limited company, get in touch today.

We provide our services across Manchester, Stockport, London, Birmingham, Cardiff, Bristol, Glasgow, Leeds, Nottingham, Leicester, Edinburgh, Sheffield, Bradford, Coventry, Liverpool and Belfast.

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