What is a tax deductible expense?

One of the biggest questions we get asked – “what can I claim?”

The expenses that you can claim for are those that are directly related to the running of your business.  The key thing to remember is that in order to be a deductible expense it must be incurred “wholly and exclusively for the purposes of the trade”

You cannot claim expenses for any item that is not fully related to the running of your business such as: clothing (except protective clothing), your own pay, business entertainment expenses. your own food or travel expenses.  There are some exceptions in relation to food and travel expenses.  Hotel accommodation incurred on a business trip where there is no personal motive in the trip, is an allowable deduction.  Where a hotel bill for a business trip includes reasonable amounts for both overnight accommodation and food then these two amounts should not be disaggregated. If the accommodation is allowable then so too is the food. 

One thing you cannot claim a deduction for when calculating your profit is capital expenditure. Capital expenditure is money you spend on buying or maintaining land, property or equipment for your business. You may be able to claim capital allowances on some of this expenditure – tax relief on these items is claimed over an 8-year period.

Allowable expenses include:

  • Purchase of goods for resale
  • Wages, rent, rates, repairs, light and heat, insurance etc
  • Motor/machinery running costs
  • Accountancy and legal fees
  • Interest paid on business borrowings

Disallowed expenses include:

  • Capital expenditure
  • Personal mileage expenses
  • Food expenses
  • Accommodation
  • Client entertainment
  • Clothing costs

If in doubt, keep a record of it and drop us a email if you have any queries.