Are you looking for a complete list of allowable limited company expenses in the UK? Then, here is a blog that you must read.
It is important for a business to know what allowable limited expenses are to calculate their taxes. If you have registered as a limited company recently, you will have a hard time understanding the complex structure of tax regulations in the UK. This happens to the best of businesses; however, with our help, you will be good to go.
In this blog, we will simplify the tax structure for you by covering the intricacies of the expenses of a limited company. We will first discuss what the term allowable expense means and the major types of expenses a limited company incurs. Then, we will give our readers a list of allowable expenses to help them file their taxes accurately and on time. Let’s begin!
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What Does an Allowable Expense Mean?
Allowable limited company expenses are those costs that a business can deduct from its taxable income. What this means for a limited company is that by appropriately counting your expenses, you can reduce your income tax. These costs must be incurred for the purpose of trade, and you must also provide them to the regulatory bodies if necessary. In addition, the expenses should be reasonable in amount. In the next section, we will list all the major allowable expenses that a limited company might incur.
What are the Allowable Limited Company Taxes?
This list is not complete and attempts to cover major expenses that can be deducted from your taxable income. We advise our readers to visit the HMRC website to get complete information before filing their taxes. But the list below will help you get the information that may not be easily available elsewhere:
Wages or salaries are an allowable limited company expense. This means that if the company is paying its director a salary, you can claim it as an allowable expense. Therefore, the business will not have to pay additional tax for this salary if you are the director yourself.
Pensions are also an allowable expense if you have signed an agreement with your provider. You can deposit up to £60,000 in a pension pot without paying any tax. However, you will have to pay taxes if the amount exceeds.
3. National Insurance Contributions (NICs)
If a limited company is paying national insurance contributions (NICs) on behalf of its employees, they can also be excluded from your taxable income. However, there is a threshold for it, and once you cross the limit, you will have to pay taxes.
4. Health-Related Costs
The costs that a business incurs for providing health benefits to its employees are allowable limited company expenses. This also includes expenses for glasses and lenses if the regulatory body finds that these health disorders are related to the nature of the work.
5. Advertising and Marketing
If you are paying for advertising and marketing services for the purpose of your trade, you can also deduct these expenses from your taxable income. It is important to remember that this also includes costs associated with PR.
6. Business Trips
The costs of travelling and staying in hotels for business-related activities are also an allowable expense. Therefore, if any employee is travelling at company expense for business, you can deduct those expenses from your taxable income.
7. Bank Fees
Another important allowable limited company expense is the bank fee. This includes charges on business accounts, credit cards, and loan interest.
8. Trivial Benefit
A limited company may award gifts to its employees; the expenses for these gifts are also allowable. However, it is important to mention that these expenses must be within a limit and viable.
9. Subscription Expenses
If you have subscribed to any magazines, journals, or e-books for your business, deduct them from your taxable income. It is important to note that the subscriptions must be professional in nature.
10. Phone Bills
A limited company may have a sales team or might communicate with phones within their premises. The phone bill for these business-related activities is another allowable limited company expense.
11. Other Popular Expenses
There are too many expenses with different regulations to be covered in a single blog. Therefore, we recommend our readers thoroughly discuss the implications of the costs with their tax advisors. Here are some more important expenses that should be mentioned:
- Entertainment expenses
- Travel costs
- Childcare expenses
- Use of home as office
- Business Insurance
- Startup fixed costs
If you are looking for a credible tax advisor, contact us!
A Quick Summary
Allowable limited company expenses are those costs that can be deducted from the taxable income of the business. These costs should be associated with the trade and should be of a reasonable amount.
The common allowable expenses include wages, pensions, NICs, health expenditures, and advertising costs. In addition, business trips, bank fees, and professional subscriptions are also allowed to be deducted from taxable income. Nevertheless, it is important to remember that a limited company should have a reliable accounting and tax advisor before filing taxes.
We at AccountingFirms understand that limited companies require the best services to avoid regulatory fines. Therefore, we provide you with the most seasoned experts in the UK. Click here to get an instant quote!