What start-ups should claim as expenses

Starting a business can be an expensive time. Many businesses take time to establish and don’t immediately give the owner a reasonable income, so it’s important that you claim whatever legitimate expenses you can, which will reduce your tax bill.

If you’ve formed a limited company you can claim relevant expenses for up to seven years before the business begins operations. We’ll discuss this with you when forming the company on your behalf, but it’s worth knowing and keeping documentation for anything you think might be relevant.

The key is that anything you claim must be wholly and legitimately a business expense, so no lunches out with the family and claiming it was a directors’ meeting!

What are the most common expenses that start-ups need to claim?

Mobile phone bills – you can only really claim these if they are in the name of the company, so if you have a personal mobile it’s worth speaking to your network to switch over to a business account.

Use of home – if you’re using your home as your office you can claim expenses against the legitimate costs of doing this. At the end of your first year of trading we’ll send you a short spreadsheet to complete with your expenses so we can calculate what can come off your tax bill.

Pension contributions – making company pension contributions is a very tax-efficient way of saving into a pension and they can also be deducted from your corporation tax. The situation is slightly different if you’re a sole trader as you can’t claim pension contributions as an expense against the business.

Washing branded clothing – there’s a little-known tax break which gives you £60 a year off your tax bill for washing company branded clothing. It’s available to employees as well as directors of limited companies and sole traders. Let us know you wear branded clothing when at work and we’ll make the arrangements when we do your tax return.

Goodwill – if you already had a good network of contacts and potential clients when you started your company we can claim that you have invested some “goodwill” into it by virtue of the potential benefits of these relationships. The value of goodwill is capped at £10,000 and it has to be knocked off your company tax bill over five years.

Set-up expenses – you’ll need both some equipment and, presumably, some other things like a website, business cards, and a LinkedIn profile in order to start your business. If you have taken professional advice – even if that was before you officially began work as a sole trader or formed your limited company – you can still claim the costs of that advice and other money you have paid for things directly and wholly related to the business, such as laptops, office furniture, and the costs of marketing.

Travel – keep a note of your mileage as soon as you start making business-related journeys, even if they are before you officially set up as you can claim the costs back against any tax bill. Once you’re officially a TLC client we’ll set you up on TripCatcher which makes it super-easy to log your mileage and make a claim.

Business insurance – there’s a variety of types of business insurance that you might need, from public liability to professional indemnity and cyber insurance. You’ll need to get advice from a qualified expert about what’s necessary and what’s recommended for your business (that’s not us, but we can signpost you to some). If you’ve formed a limited company you might also want to explore insurance like health, relevant life and business interruption, as the costs of these can also be legitimate business expenses.

The list of expenses you can claim is pretty long so if you want to read about even more, check out this article on Company Bug.

There are so many more expenses that start-ups can claim, we’ve just covered the main ones here (read more in this article) – if you need advice about starting your own business why not give one of our friendly team a call on 01937 534505?