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Tax Savings Tips: What expenses can you claim in your Limited Company?

When you're running a business, you're going to have all sorts of expenses such as training, marketing, and networking events especially when you're just starting out. Of course, there are also the day-to-day expenses like rent, staff salaries, office supplies and the list just goes on. But did you know that all these expenses can be considered allowable, meaning you can claim them as deductions when it comes to your taxes? In today's blog, let's explore all the different expenses you can claim in your limited company.

Maximising your tax savings is all about making sure you're taking full advantage of the deductions available to you. But more often than not, without the guidance of a tax professional, a business owner remains unaware of these tax advantages all throughout the tax year. Yet, there are initial startup costs and day-to-day business expenses that can be used as allowable expenses, as well as some lesser-known deductions that can ultimately help business owners save on their taxes.

Let's talk about tax-deductible expenses!

It's important to understand what makes an expense tax-deductible. Some expenses, like business entertainment, aren't eligible for tax relief. But keep in mind that if you're entertaining yourself or your staff, these expenses are usually allowable and may result in a benefit in kind charge. Tax relief kicks in when your tax-deductible expenses reduce the taxable profit of your business. Say for example, your business brings in £100,000 in revenue but incurs £30,000 in tax-deductible expenses, your taxable profit would be £70,000. A lower taxable profit means a lower tax bill. Just remember that the tax rates for the remaining profit might vary based on things like the small profits threshold and other factors.

How about the difference between revenue and capital expenditure?

Revenue expenditure refers to the money you spend to earn revenue. These expenses, like salaries, office supplies, and marketing costs, are shown in your profit and loss accounts. The cool thing is that revenue expenses are typically tax-deductible, so you can deduct them when calculating your profit, which gives you tax relief.

On the other hand, capital expenditure is when you buy assets or items that will have a future use and last for more than two years in your business. Think laptops, machinery, furniture, or vehicles. The cost of these assets is shown on your balance sheet, and they're depreciated over their expected lifespan. From a tax perspective, most businesses can take advantage of the annual investment allowance, which means you can write off 100% of the cost in the current tax year. Pretty neat, huh?

But wait, there's more! In addition to the usual revenue and capital expenses, there are some other tax-deductible expenses you should know about. These lesser-known deductions can help you further reduce your tax liability. Check these out:

  • Salaries for Spouses and Children: If your spouse or kids are involved in your business and do some work, you can actually pay them a salary. As long as they have their personal allowance available, their salary should be tax-free.

  • Mileage Costs: If you use your personal car for business purposes, you can claim mileage costs. The standard rate is 45p per mile for the first 10,000 miles and 25p per mile after that.

  • Business Travel: Expenses related to business travel, even if you mix in some personal time, can be tax-deductible. So it's a great chance to attend training events in cool locations while enjoying a tax-free holiday.

  • Company Clothing: If you've got clothing with your business branding, like uniforms or clothes

Understanding and utilising the expenses you can claim in your limited company is crucial for maximising tax savings and reducing your tax liability. If you need personalised assistance or expert advice in navigating through these deductions, don't hesitate to reach out to a qualified tax accountant like myself. Together, we can ensure that you're making the most of your business expenses and optimising your tax strategy. Contact me today to start saving on taxes and let's make your financial journey a smooth and rewarding one!

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