Introduction to Business Taxation

For tax compliance reasons all businesses and self-employed people must keep impeccable records of their outgoings and proof that these relate to their business.

The golden rule being that expenses must be wholly and exclusively incurred for their job. Exactly what can be claimed depends on the type of business. People should think sensibly about what they really need to do their jobs and claims should be realistic and appropriate and substantiated. Below is a brief list of the types of expenditure you can claim in addition to the cost of the products or services you may sell.

People who work from a business premises, which may be your home if your business is home based, can claim tax deductions on rent on the property and bills such as heating, water and electricity. Claims can be more complicated for those working from home as they can only claim a proportion of their total costs. eg if you have a six room house and one room is used as an office, you can claim 1/6th of the cost of the rent.

• Costs of stock/materials sold
• Workwear, small tools etc
• Business telephone costs including mobile phone
• Motor expenses and bicycle expenses for business use (alternatively claim mileage from your business at HMRC approved rates [40p for first 10,000 miles] to minimse paperwork)
• Car hire or van rental if for specific business use (40p per mile rate is not claimable for these trips)
• Postage, courier charges , printing and stationery eg business cards , leaflets, flyers, postcards, brochures etc
• Advertising eg yellow pages, newspapers, Google Adwords etc
• Computer consumables used for the business eg blank CDs, DVDs, USB memory sticks and external hard drives used for backing up your records
• Memory cards , batteries and accessories for your business mobile phone or digital camera
• Office and printing supplies including inkjet cartridges and toner (recycled cartridges are also environmentally friendly)
• Bank charges (although try to use a fee free bank account if possible)
• Broadband used for business purposes
• Wages and subcontractor costs
• Professional fees eg accountancy, book keeping
• Trade subscriptions
• Warranties for your PC and equipment
• Subscriptions to magazines which are relevant to your business
• Reference books for business, guides for tax saving, writing business plans, business development, presentation and negotiation skills etc
• Rail fares , bus and coach travel, taxi fares, flights, hotel and subsistence for business trips
• Rent and rates of business premises eg serviced offices
• Website development (including domain names and hosting)
• Use of home allowance if you work from home or do your book keeping at home (a percentage of light & heat, home insurance etc depending upon the proportion of your home used for business)
• Software annual licence fee (eg Anti virus) , online backup, pc utilities
• Business and laptop insurance

Expenditure on larger items ('fixed assets') such as computers are treated differently as they are capital items (not expenses) and eligible for capital allowances and so the cost cannot be expensed immediately. Capital allowances enable you to deduct a portion of expenses over a number of years against profits.

For more complete details see the HMRC web site on keeping records and on tax allowances and reliefs and for more detailed guidance. 

For details of corporation tax rates and annual income allowances.