Director, employee or self empployed expenses
Expenses are confusing
So first I'll cover Employees. Remember an employee is also a director of a Limited Company as the director is always treated as "working" for the company. So an employee and director are the same thing when dealing with expenses. But there are some differences in Practice that I'll come to later.
For Employees the common question I have is can Employees claim working from Home costs and how do I do this. Employees can no longer claim Working from Home costs unless it is basically in a contract and they are required to do so. So if for example there's not enough space in the office or you don't have it built into a contract - and you chose to work from home - unfortunately that is not an allowable reason to claim working from costs. This gov website explains it:
https://www.gov.uk/tax-relief-for-employees/working-at-home
Now for Directors - The same rule applies for Working from Costs. But there are a couple of nuance questions I normally get from Director of Limited Companies.
1. I've spent some money from my personal account for the Company, can I claim this back? This is an easy answer - Normally Yes if its related to the business. e.g. These are some examples, Travel, vehicle Mileage for business purposes, so basically whatever is a business expense. The director simply needs to provide receipts to the Company records, and then is paid by the limited company. An accountant can advise on how this is done in the books - but its straight forward.
2. So what other expenses can be claimed for by my limited Company. In truth the answer is - what is legitimately is a business expense.
Common Company expense types and their tax treatment:
So lets cover some things in simple terms:
a. Mobile/Broadband costs - these are deductible if in the Company's Name.
b. Client entertainment? Is never allowable as a tax deductible expense.
c. Entertaining staff? Yes up to £150 per year per employee on an event (must be open to all employees). So everyone could be a winner here.
d. Stationary - yes including logo'd gifts to clients etc, mugs, pens etc.
e. Staff training and development.
f. Charitable donations are tax deductible too.
g. Pension contributions (an excellent way to plan for the future)
h. Laundry (some specific information here: https://www.gov.uk/guidance/job-expenses-for-uniforms-work-clothing-and-tools
i. Fines - Are not tax deductible.
Sole Traders
The working from home rules are different for sole traders that use their home for business purpose.
You have two choices:
a. you can choose to claim Simplified expenses for working from home; or
b. or you can work out your actual costs by calculating the proportion of personal and business use for your home, e.g. the proportion of utility bill expenses incurred by your business.
Here is some information on simplified expenses:
https://www.gov.uk/simpler-income-tax-simplified-expenses
Simplified expenses for the self-employed mean you claim a flat rate for your allowable expenses based on the number of hours you work from home each month. You’ll need to work a minimum of 25 hours a month from home to qualify.
If you use simplified expenses, then don’t forget you can also claim the business proportion of your telephone or internet expenses as these aren’t included in the flat rate allowance but its not recommended to claim if the contract is in your personal name because there is no way of knowing how much business calls cost (as they would be included part of a minutes contract).