Introduction

Running a small business means juggling a lot of responsibilities, and managing your finances is one of the most important ones. Understanding which expenses you can claim can make a massive difference when it comes to reducing your tax bill and freeing up cash for growth.

The problem? HMRC’s rules around business expenses can feel complicated and intimidating. If you’re not careful, you might miss out on valuable deductions—or worse, claim something you’re not allowed to.

In this guide, we’ll walk you through everything you need to know about business expenses: what you can claim, what you can’t, and how to keep your finances in check.

What Are Business Expenses?

In simple terms, business expenses are the costs your company incurs to operate. But HMRC requires these expenses to be “wholly and exclusively” for business purposes. This means if you spend money on something that’s partly for personal use, you might not be able to claim the full amount—or anything at all.

Key Example:

• You buy a laptop for work but occasionally use it to stream Netflix. In this case, you can only claim the percentage of the laptop’s use that is dedicated to your business.

Understanding this principle is critical for staying compliant and maximising your claims.

Common Claimable Business Expenses

Here’s a breakdown of the most common expenses small business owners can claim:

1. Office Costs

• Claimable: Rent for office space, business utility bills, office furniture, and supplies.
• If You Work From Home: You can claim a proportion of your household bills, like electricity and internet, based on how much of your home is used for business.

2. Travel Expenses

• Claimable: Business-related travel, including train fares, mileage, taxis, flights, and hotels.
• Not Claimable: Daily commutes to your regular place of work.

3. Staff Costs

• Salaries, National Insurance Contributions (NICs), pensions, and bonuses for employees are all deductible.

4. Marketing and Advertising

• Costs associated with promoting your business, including social media ads, website hosting, branding services, and promotional materials, can be claimed.

5. Professional Fees

• Fees for accountants (like us!), solicitors, or consultants who provide business-related services.

6. Software and Subscriptions

• Claim tools like Xero, Canva, or any software essential for running your business.

Expenses You Might Not Realise Are Claimable

There are plenty of less obvious expenses that small business owners often overlook:

• Business Insurance: Public liability insurance, professional indemnity, or employer’s liability insurance.
• Bank Charges and Loan Interest: If you have a business account or loan, those fees are deductible.
• Training and Development: Courses or workshops that enhance your skills and are directly related to your business.

By staying aware of these, you can maximise your deductions and keep more money in your business.

What Can’t You Claim?

While there’s a long list of claimable expenses, it’s equally important to know what’s off-limits.

Common Non-Claimable Expenses:

• Client Entertainment: Meals, drinks, or gifts for clients cannot be deducted.
• Personal Expenses: Anything unrelated to your business, like personal holidays or non-work-related purchases.
• Fines and Penalties: Parking tickets, HMRC penalties, or speeding fines are non-claimable.

Grey Areas to Watch:

Sometimes, the line between business and personal use can get blurry. For example, if you buy a mobile phone that’s used for both work and personal calls, you can only claim the portion used for business purposes.

How to Stay HMRC-Compliant

Staying organised and informed is the key to avoiding penalties and ensuring you’re claiming everything you’re entitled to.

1. Keep Detailed Records

HMRC expects you to maintain accurate records of all your expenses. This includes receipts, invoices, and bank statements. Use accounting software like Xero or Dext to digitise and organise these records.

2. Separate Your Finances

Always use a dedicated business bank account. This makes it easier to track expenses and prevents you from accidentally mixing personal and business costs.

3. Use a Mileage Log

If you claim mileage for business travel, make sure to keep a detailed log of your trips, including dates, destinations, and purposes.

4. Regularly Review Your Claims

Schedule time each quarter to review your expenses. This ensures you’re staying on top of things and not missing out on claimable costs.

The Consequences of Getting It Wrong

Claiming expenses incorrectly can lead to serious consequences, including:

• Fines and Penalties: HMRC takes compliance seriously, and errors can result in fines.
• Audits: Incorrect claims could trigger an audit, which can be time-consuming and stressful.

By following the rules and staying organised, you can avoid these pitfalls and focus on growing your business.

Practical Example: How Expense Claims Can Save You Money

Let’s say you’re a freelance graphic designer. Here’s how your expenses might look:

Claimable Expenses:

• Laptop Purchase: £1,200
• Design Software Subscription: £50/month (£600 annually)
• Home Office Use: £800/year
• Travel to Client Meetings: £300/year

Total Claimable Expenses: £2,900

By deducting these expenses from your taxable income, you could save hundreds on your tax bill.

Need Help? DAZE Has Your Back

If all this sounds overwhelming, don’t worry—you’re not alone. At DAZE Accounting, we specialise in helping small business owners manage their finances with ease. From tracking your expenses to ensuring compliance with HMRC, we’ve got you covered.

Conclusion

Understanding business expenses isn’t just about saving money—it’s about taking control of your finances and setting your business up for success.

Want to make the most of your expense claims without the stress? Contact DAZE Accounting today and let’s simplify things together.

Ready to maximise your tax savings? Reach out to DAZE Accounting and let us take the hassle out of your finances.