Whenever you spend anything for your business, this is an expense … but some are ‘allowable’ and some are not. Basically, an allowable expense helps you to pay less tax!
Allowable Expenses / Allowable for Tax / Tax Deductible Expenses are all the same thing – it means that the expense is allowed to be taken off your revenue/turnover/income in order to calculate how much tax you have to pay.
Example:
Revenue 50,000
Allowable expenses (30,000)
Taxable income 20,000
You can put most costs through your business if you want to (as long as they are legal), but not all of them are allowable. For example, paying a car park fee is allowable, but paying a parking fine is not. Having clothing with your company logo on it is allowable, but a plain suit is not – even if you only ever wear it for work.
Here is a very basic list of allowable expenses:
· office costs e.g. stationery or phone bills
· travel costs e.g. fuel, parking, train or bus fares
· clothing expenses e.g. uniforms
· staff costs e.g. salaries or subcontractor costs
· things you buy to sell on e.g. stock or raw materials
· financial costs e.g. insurance or bank charges
· costs of your business premises e.g. heating, lighting, business rates
· advertising or marketing e.g. website costs
As ever with HMRC, there are lots of rules and sub-categories in addition to this basic list, and there are some allowances you can claim at a flat rate such as ’home as office’ and ‘flat rate mileage’. These are not something you need receipts for, but do need to include in your tax return calculations.
Please do contact me at liz@money-bee.co.uk if you have any queries on this or anything else finance related.
Thanks for reading!