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The Complete UK Guide for Limited Companies, Sole Traders and Partnerships

Last updated: July 2026

Wondering whether something is a legitimate business expense? This guide explains what you can and can’t claim, how HMRC’s rules work, and the most common mistakes businesses make.

Contents

The Golden Rule

Most business expenses are tax deductible if they are incurred wholly and exclusively for the purposes of your business.

In simple terms, ask yourself:

If the answer to all three questions is yes, there’s a good chance the expense is allowable.

Some expenses have additional rules, which we’ll explain throughout this guide.

Remember: Just because something is paid from your business bank account doesn’t automatically make it tax deductible.

Quick Reference Guide

ExpenseUsually Claimable?Notes
Laptop✅Business use
Desktop computer✅Business use
Monitor✅Business use
Office desk✅Business use
Office chair✅Business use
Mobile phone✅Special rules apply
Broadband⚠️Depends on who pays
Home office costs✅Various methods available
Business mileage✅Approved rates or actual costs
Fuel⚠️Depends on vehicle ownership
Parking✅Business journeys
Congestion charges✅Business journeys
Speeding fines❌Never allowable
Hotel accommodation✅Business travel
Meals while travelling✅Business travel only
Client entertaining❌Usually not tax deductible
Staff entertaining✅Subject to conditions
Accountant’s fees✅Yes
Legal fees⚠️Depends on the purpose
Insurance✅Business policies
Software✅Usually fully allowable
Training✅Usually allowable
Gym membership❌Usually personal
Everyday clothing❌Even if only worn for work
Uniform✅Yes
Safety clothing✅Yes

Office Equipment

One of the most common questions we receive is:

“Can I buy equipment through my business?”

In many cases, the answer is yes.

Computers and Laptops

Usually allowable.

Examples include:

These purchases are normally treated as capital assets, but most businesses can obtain full tax relief through capital allowances.

Example

Sarah runs a graphic design company.

She buys:

All are purchased solely for business use.

Result: These would normally qualify for tax relief.

Office Furniture

Usually allowable.

Examples:

Furniture purchased for genuine business use is generally deductible.

Standing Desks

Yes.

Standing desks have become increasingly popular and are generally allowable where purchased for business use.

The same applies to:

Cameras

Often allowable if required for your business.

Examples include:

Buying an expensive camera purely for personal photography would not qualify.

Drones

Sometimes.

A drone used for:

may qualify.

A drone bought mainly for personal enjoyment would not.

Coffee Machines

This is one of the questions accountants hear surprisingly often.

If the coffee machine is provided for employees in the workplace, it’s generally allowable.

If it’s mainly for your personal enjoyment at home, HMRC could challenge the claim.

TVs

Sometimes.

Examples where a TV could be allowable include:

Buying a television for your living room and calling it a business expense would almost certainly fail the HMRC test.

Books

Professional books are generally allowable.

Examples include:

Novels and general-interest books would not normally qualify.

Tools and Equipment

Tradespeople can usually claim equipment such as:

Provided they’re purchased for business purposes.

Software and Online Services

Software is usually straightforward.

Most subscriptions used to run your business are allowable.

Examples include:

AI Subscriptions

Artificial intelligence tools are becoming common business expenses.

Examples include:

Where they’re used for business activities, subscriptions are generally allowable.

Website Costs

Most website costs are deductible.

Examples include:

Building an entirely new website may have different tax treatment depending on the circumstances, but in practice most small businesses receive tax relief.

Mobile Apps

Business apps are normally allowable.

Examples:

Online Memberships

Business memberships are generally allowable where they relate to your trade.

Examples:

Purely personal memberships are not deductible.

Before Buying Anything

Before making a purchase, ask yourself these three questions:

✅ Is it wholly and exclusively for the business?

✅ Can I explain to HMRC why the business needed it?

✅ Do I have evidence of the purchase?

If the answer is yes to all three, it’s often a good indication that the expense will qualify.

Next: In Part 2 we’ll cover phones, broadband, home office costs, travel, hotels, meals, mileage, company cars and electric vehicles.

Phones, Broadband, Home Working and Travel Expenses

These are some of the most misunderstood business expenses. The rules depend on who owns the asset, how it’s used, and whether there is any personal benefit.

Mobile Phones

Can I claim my mobile phone?

Usually, yes.

The tax treatment depends on who owns the phone contract.

Company-owned contract

This is generally the simplest option.

If your limited company takes out the contract and pays the bill:

For most company directors, this is the most tax-efficient arrangement.

Personal contract

If the contract is in your personal name, the rules are different.

Business calls can usually be reimbursed by the company, but the monthly line rental cannot normally be claimed, because you would be paying it anyway for personal use.

Example

John pays £45 per month for his personal mobile phone.

He uses it for business and personal calls.

The company can usually reimburse the identifiable business calls, but not the entire £45 monthly contract.

Additional Phones

A second business phone may also be allowable where there is a genuine business need.

Examples include:

Broadband

Can I claim my home broadband?

It depends.

Company broadband

If your company arranges and pays for the broadband contract primarily for business purposes, the cost is generally allowable.

Personal broadband

If you already had broadband before starting your business, you generally cannot simply claim the whole bill.

You may be able to claim the additional business costs, but not the personal element.

Business Premises

Broadband installed at business premises is generally fully deductible.

Home Office Expenses

Many businesses operate partly or entirely from home.

HMRC allows tax relief, but there are different methods depending on your circumstances.

Sole Traders

You can usually choose between:

Examples include:

The business proportion should be reasonable.

Limited Companies

The rules differ.

You may:

Professional advice is worthwhile if you work from home permanently.

Office Equipment at Home

Equipment used for your business is normally allowable even if you work from home.

Examples include:

Internet and Streaming Services

Can I claim Netflix?

Usually no.

Although there are exceptions for certain creative businesses, Netflix is normally regarded as personal expenditure.

Spotify

Generally no, unless there is a genuine business purpose.

A shop playing background music should instead ensure it has the appropriate commercial music licences.

Business Streaming

Subscriptions used directly within your business activities may qualify.

Examples include:

Travel Expenses

Business travel is usually allowable.

Ordinary commuting is not.

Understanding the difference is extremely important.

Business Journeys

Examples include:

These journeys are usually allowable.

Ordinary Commuting

Travel between:

Home ↔ Permanent Workplace

is normally not tax deductible.

This applies even if you own the business.

Temporary Workplaces

Travel to a temporary workplace is often allowable.

There are detailed rules, including the well-known 24-month rule, so seek advice if you’re working at another location for an extended period.

Hotels

Hotel accommodation during business travel is generally allowable.

Examples:

Luxury upgrades for personal reasons may not qualify.

Parking

Business parking charges are generally allowable.

Examples include:

Congestion Charges and Toll Roads

Usually allowable where incurred during business journeys.

Examples:

Speeding Fines

These are never tax deductible.

The same generally applies to:

Even if the offence occurred during business travel.

Trains, Flights and Taxis

These are usually allowable where incurred for business purposes.

Examples include:

Keep receipts wherever possible.

Food and Drink

One of the biggest areas of confusion.

Meals During Business Travel

Food purchased while travelling on business is often allowable.

Examples include:

The travel itself must qualify as business travel.

Everyday Lunches

Buying yourself lunch while working in your normal office is not normally allowable.

Everyone needs to eat, so HMRC generally regards this as personal expenditure.

Coffee

A coffee bought during a qualifying business journey will usually be treated the same as other subsistence costs.

Buying coffee every morning on your way to your normal workplace is generally a personal expense.

Mileage

If you use your own vehicle for business journeys, you can usually claim mileage.

The approved mileage rates cover costs such as:

This means you cannot normally claim those costs separately when using the approved mileage method.

Electric Vehicles

Electric vehicles have become increasingly tax-efficient.

Depending on your circumstances, you may be able to claim relief for:

If you’re considering buying an electric company car, it’s worth obtaining advice before making the purchase, as the tax savings can be significant.

Quick Checklist Before Claiming Travel

Before claiming travel costs, ask yourself:

If you can answer those questions confidently, claiming your travel expenses should be much easier.

Next: Part 3 covers company cars, business entertaining, staff costs, clothing, training, professional fees, insurance and marketing expenses.

Company Cars, Staff Costs, Marketing and Professional Expenses

Some business expenses are straightforward. Others depend on who benefits, whether there’s any personal use, or specific HMRC rules. This section covers the expenses that often generate the most questions.

Company Cars

Can my company buy a car?

Yes.

A limited company can purchase a car for business use, but the tax consequences depend on the type of vehicle and whether there is any private use.

If a director or employee uses a company car privately (including commuting), a Benefit in Kind (BIK) usually arises and tax may be payable.

Electric Company Cars

Electric cars are currently one of the most tax-efficient company vehicles.

Potential advantages include:

If you’re considering buying an electric vehicle through your company, it’s worth obtaining advice first, as the tax savings can be substantial.

Fuel

The rules depend on whether you’re using:

Fuel for business journeys is usually allowable.

Fuel for private journeys generally isn’t.

Charging an Electric Vehicle

Business charging costs are generally allowable.

Examples include:

Different rules apply depending on vehicle ownership.

Bicycles

A bicycle purchased for genuine business use may qualify for tax relief.

Many employers also use the Cycle to Work Scheme, which has separate rules.

Insurance

Most business insurance is tax deductible.

Examples include:

Personal insurance policies are generally not deductible.

Professional Fees

Professional services used by your business are normally allowable.

Examples include:

Legal Fees

Some legal costs are deductible.

Examples include:

However, legal costs relating to buying assets or acquiring businesses may be treated differently.

Bank Charges

Business banking costs are usually allowable.

Examples include:

Interest

Business loan interest is often allowable.

Examples include:

Personal borrowing normally isn’t deductible unless it has been used for qualifying business purposes.

Marketing and Advertising

Marketing expenses are usually straightforward.

Examples include:

These costs are generally allowable.

Social Media

Costs associated with promoting your business online are normally deductible.

Examples include:

Advertising and content creation costs are usually allowable where incurred for business purposes.

Sponsorship

Business sponsorship is often allowable where it genuinely promotes your business.

Examples include:

There should be a commercial benefit to the business.

Training

Training costs are usually allowable where they help you maintain or improve existing business skills.

Examples include:

Training that equips you for an entirely new trade or profession may not qualify.

Trade Subscriptions

Professional subscriptions are often allowable where they relate to your business.

Examples include:

Staff Costs

Most genuine employee costs are deductible.

Examples include:

Staff Training

Training provided to employees is generally allowable.

Examples include:

Staff Uniforms

Uniforms are generally allowable.

Examples include:

Everyday Clothing

This surprises many people.

Normal clothing is not tax deductible.

Examples include:

This applies even if you only wear them for work.

Safety Clothing

Protective clothing is usually allowable.

Examples include:

Gifts to Employees

Employers can often provide gifts to staff.

Different tax rules apply depending on:

Small gifts may qualify as trivial benefits, provided the relevant conditions are met.

Staff Parties

Many businesses can provide annual staff events without creating a tax charge.

Typical examples include:

Conditions apply, including an annual cost limit per attendee.

Gifts to Customers

Customer gifts are a common area of confusion.

Some gifts are allowable.

Others aren’t.

The VAT and Corporation Tax rules are different, so it’s worth checking before making large purchases.

Business Entertaining

Can I claim meals with clients?

Usually no.

Business entertaining of customers and potential customers is generally not tax deductible for Corporation Tax purposes.

Examples include:

Many business owners are surprised by this rule.

Staff Entertaining

Staff entertaining is different.

Events primarily for employees are generally allowable.

Examples include:

Separate tax rules apply if directors attend with employees.

Charity Donations

Companies can often obtain tax relief on qualifying charitable donations.

Different rules apply depending on how the donation is made.

Professional Books

Reference books used within your profession are generally allowable.

Examples include:

Novels and leisure reading are not.

Newspapers

Daily newspapers are generally regarded as personal expenditure.

However, specialist trade publications used within your business may qualify.

Magazines

Industry-specific magazines are often allowable.

Examples include:

Before Claiming…

Ask yourself:

If you’re unsure, it’s always safer to ask before submitting your accounts.

Next: Part 4 includes the most frequently asked questions, common mistakes, VAT considerations, record keeping tips and a final checklist.

Frequently Asked Questions About Business Expenses

Below are answers to some of the questions we’re asked most often.

Can I Claim Business Expenses Without a Receipt?

Sometimes.

HMRC doesn’t specifically require a receipt for every expense, but you must be able to prove the expense was genuine.

Alternative evidence might include:

Where possible, always keep receipts.

If you’d like to know more, read our guide on claiming business expenses without a receipt.

Can I Claim Cash Purchases?

Yes, provided you have suitable evidence and the purchase was wholly and exclusively for your business.

Can I Claim Coffee?

Usually only if it’s part of qualifying business travel.

Examples that are normally allowable:

Buying your usual morning coffee on the way to your normal workplace is normally a personal expense.

Can I Claim Lunch?

It depends.

Usually allowable

Usually not allowable

Can I Claim Alcohol?

Sometimes.

Examples include:

Buying alcohol for yourself is generally a personal expense.

Alcohol purchased while entertaining clients is generally not tax deductible.

Can I Claim a Watch?

Usually no.

Even if you wear it while working, a watch is generally regarded as a personal item.

The same usually applies to:

Can I Claim Glasses?

Normally no.

Prescription glasses are generally regarded as personal.

There are limited exceptions for specialist safety eyewear required for work.

Can I Claim a Gym Membership?

Usually no.

Even if improved fitness helps your work, gym membership is normally regarded as a personal expense.

Can I Claim a Bicycle?

Sometimes.

A bicycle used for business journeys may qualify.

If you’re an employer, the Cycle to Work Scheme may also be worth considering.

Can I Claim My Internet?

It depends.

If it’s a business contract, usually yes.

If it’s your personal home broadband, only certain business costs may be claimable.

Can I Claim My Electricity Bill?

If you work from home, you may be able to claim an appropriate proportion of household running costs.

The exact calculation depends on whether you’re a sole trader or operate through a limited company.

Can I Claim My Mortgage?

Mortgage capital repayments are not a business expense.

Some home-working arrangements may allow relief for certain household costs, but professional advice is worthwhile before making significant claims.

Can I Claim a Holiday?

No.

A family holiday isn’t transformed into a business expense simply because you answer a few emails while you’re away.

However, genuine business travel may qualify.

Can I Claim Childcare?

Normally no.

Childcare is generally regarded as a personal expense.

There may be other government schemes available, but it isn’t usually a deductible business expense.

Can I Claim a TV Licence?

Only where it’s genuinely required for business purposes.

For most businesses, the answer will be no.

Can I Claim Spotify or Netflix?

Usually no.

These are generally regarded as personal subscriptions.

Creative industries may occasionally have different circumstances.

Can I Claim My Dog?

Almost certainly no.

There are limited exceptions for genuine working animals, but family pets are not business expenses.

Common Mistakes

Here are some of the most common errors we see.

❌ Claiming ordinary commuting.

❌ Claiming everyday clothing.

❌ Claiming client entertaining.

❌ Claiming personal shopping.

❌ Forgetting to keep receipts.

❌ Paying personal expenses from the company bank account.

❌ Assuming everything paid by the business is tax deductible.

Avoiding these mistakes can save both tax and unnecessary discussions with HMRC.

VAT and Business Expenses

Remember that Corporation Tax and VAT don’t always follow the same rules.

For example:

If your business is VAT registered, it’s worth checking both sets of rules.

Keeping Good Records

Good bookkeeping makes claiming expenses much easier.

We recommend keeping:

Digital copies are usually perfectly acceptable, provided they’re clear and complete.

What Happens If HMRC Ask Questions?

HMRC may ask you to explain:

Keeping clear records makes these enquiries much easier to deal with.

Our Advice

If you’re unsure whether something is a business expense, don’t guess.

A quick conversation before making a purchase can often save:

Still Not Sure?

Every business is different.

The correct answer often depends on:

That’s why it’s difficult to answer every question with a simple “yes” or “no”.

If you’re one of our clients, just get in touch before making the purchase and we’ll be happy to advise.

If you’re not yet a client and would like straightforward advice from qualified accountants, we’d love to help.

Contact CloudBook today to discuss your business and make sure you’re claiming everything you’re entitled to.

Quick Checklist

Before buying anything through your business, ask yourself these five questions:

✅ Is it wholly and exclusively for my business?

✅ Would I have bought it if I didn’t run the business?

✅ Can I prove the purchase if HMRC ask?

✅ Is there a specific HMRC rule that affects this expense?

✅ If I’m VAT registered, can I recover the VAT?

If you can answer yes to those questions, there’s a good chance the expense will qualify.

Disclaimer

This guide provides general information based on UK tax rules at the time of writing. Tax legislation changes regularly, and the correct treatment depends on your individual circumstances. Please contact us before relying on this guide for significant purchases or tax decisions.

Last reviewed: July 2026

We have increased all of our prices by 9% (see our pricing tables). Any software recharges are unaffected by this change.

Our previous increase

Our current fees were effective from April 2023 and that was our first price increase since we started the business 10 years earlier. Our prices were increased by 10% in April 2023 which was the annual inflation rate at the time.

The past 2 years

Inflation has averaged at an annual rate of 5.1% between January 2023 and December 2024, which is 10.2% since our last price increase. Interest rates have also increased from 3.5% to 5.25% during that time and have only reduced to 4.75% recently. Also, the cost of employment is increasing in April 2025 due to the increase in the employer national insurance rate to 15% and the reduction of the threshold at which employers start paying it to £5,000pa. If we tried to grow our business enough to cover these additional costs, it would be detrimental to our quality of service. As such, we need to increase our fees to keep our business model sustainable. 

The increase

We’ve taken the difficult decision to increase all of our fees by 9%. Our new pricing table can be viewed here. Any software recharged will only increase if your supplier increases their price, so the overall increase to our bills may be less than 9%.

An example

Example package feesCurrent £New £Increase
Annual+ Company55.0060.009%
Xero Grow (discounted)28.0528.050%
Subtotal83.0588.056%
VAT16.6117.616%
Total99.66105.666%

New clients

If you are a new client, you will pay the current fees for your first 12 months with us, or for your first set of accounts if you pay annually, then you’ll move onto our new fees.

Your options

We understand that these are challenging times for everyone and any increase to your costs can be difficult to deal with. So please get in touch if you’d like to discuss what options you may have to reduce your costs, such as changing your accountancy package or software supplier.

In arrears

Some of you are paying for our services in arrears. For example, if you started paying us the monthly accounts fee X months after the start of your accounting year, our invoice will state that the accounts fee is for the month of trading X months ago. If so, you are welcome to pay off the arrears (X months times by the monthly fee) at the current fee by 31st March 2025. Otherwise the new fee applies to all payments from 1st April 2025.

Annual invoicing

Some of you are paying for our services annually. If you provide us with your accounting records by 31st March 2025, this will be invoiced at the current fee. Any annual records provided after this date, will be invoiced at the new fee rates unless this is the first set of accounts we have done for you.

Get in touch

We hope that you find this change acceptable and necessary to maintain our quality of service. Please get in touch if you have any concerns, questions or suggestions.

sustainable accountants

Going paperless is one of the biggest steps a company can take to help the environment. Cloudbook Online Accountants Ltd is a sustainable 100% online accountancy service and are firm advocates of the paperless office. We are green accountants too, with solar panels, electric vehicles, and vegan accountants! However, our main goal is to provide an efficient and sustainable accountancy service that helps save clients money.

With the world experiencing its greatest climate challenge to date, we are all looking for ways to be more sustainable. Recycling and reusing goods and materials is now commonplace but moving towards a paperless office will help even more and can also save you time and money. 

Helping the Environment

Paper use is a major contributor to global warming. The effects of paper use on the climate are four-fold because the production of paper products:

  1. requires the felling of trees that are essential to store the excess carbon in the atmosphere and provide shelter to wildlife.1
  2. requires a vast amount of energy, much of which is from environmentally harmful fossil fuels.
  3. necessitates a huge amount of water (roughly 10 litres of water to produce a single piece of A4 paper) and is a major contributor to the depletion of our water reserves.
  4. leads to unnecessary waste that goes into landfill or requires recycling (which although useful, requires energy and resources). Almost a fifth of all the waste in England is generated by businesses, and 50% of business waste is paper.

The good news is that we can easily make a difference by adopting paperless processes in our businesses. There are now a multitude of Business Management Systems and tools that can replace almost every process in our day-to-day business that formerly relied on paper. For accounts, you can use CloudBook Online Accountants Ltd for your tasks like payroll, company accounts, tax returns and bookkeeping to keep your accounting sustainable.

Saving you Money

The benefits of a paperless office are not only limited to the environment. They will also save you money. UK News Group reported in 2021 that an astonishing 11% of revenue of the average company in the uk was spent on paper. It also found that printing costs were often the third highest operational expense after rent and payroll. When thinking about the costs you would save, you should consider the following:

Solutions

The savings made on banishing paper should far outweigh the cost of implementing a paperless Business Management System in the long run. Cloudbook Online Accountants Ltd use PandaDoc, Google Drive and Iris Openspace for our document sharing and collaboration. These are excellent paperless services that help us keep our fixed accountancy fees low. You can check out our pricing structure here.

Of course, there are times when printing cannot be avoided. You can however keep track of how much you’re printing by using print auditing software and by setting departmental printing budgets. Ask your employees to use the printer only when absolutely necessary and perhaps incentivise limited use. You could also consider investing in additional monitors for staff that may use paper documents as a point of reference.

Maximising Efficiency

As if saving money and the environment weren’t enough, going paperless can also make your business more efficient.

 

Services like Google Drive allow for easy access and simultaneous document sharing. It’s a great tool for collaboration and uses cloud-based storage, which is undoubtedly the go-to method of the future. Google Drive, PandaDoc and Iris Openspace are really useful tools for CloudBook Online Accountants Ltd. They make it so much quicker, easier and more efficient to provide online accountancy services to our clients. By using them, we avoid the need to print, post, and e-mail documents like accounts and tax returns, back and forth to clients; Using those outdated methods would be a huge waste of time, energy and costs. As far as we’re concerned it’s a no-brainer. You can check out our reviews os different accounting packages here.

The take-away…

Every business should try to go paperless. It will allow you to do your bit for the environment whilst saving you money and improving efficiency. If you don’t already use one, check out online Business Management systems to replace paper-based processes. Train your staff to be mindful of their paper use and help them get the most out of your business management tools. Contact us to find out the difference that CloudBook Online Accountants can make to you as part of your transformation into a paperless business.

Sources:

  1.  Over 6 million hectares of forest have already been cut down this year and we’re on an upward trend.
    ↩︎

We are startup accountants. At CloudBook Online Accountants, we’ve helped many businesses startup and grow into established profitable companies. If you’re looking for an accountant for startups, read on below to find out how CloudBook Online Accountants can help you.

startup accountants
Photo by Mike Petrucci on Unsplash

Unlimited Startup Advice

You get unlimited advice on all of our accounts packages except Annual. So you don’t need to worry about what it’s going to cost you to ask your accountant startup advice. Even if you’ve run a business before, good up-to-date advice early on from a specialist startup accountant is invaluable. It can help you avoid costly mistakes and to save tax from the start.

Startup as a Company?

One of the most important decisions you’ll have to make is what kind of structure your business should be. We have a guide and a tax calculator to help you decide. This will help explain whether to startup as a company, a partnership, or a sole trader. However, it’s usually best to talk it through with us before going ahead. You can change structure after starting a business. However, it can be costly and time consuming, so it’s best to get this correct from the start. It’s not a straight forward decision as there may be many factors to consider. Such as how to get the best tax relief if you expect a loss in the first few months.

Free Incorporation Services

If you decide to operate as a limited company, we can register a new company for you at Companies House. We don’t charge extra fees for this. We’ll just ask for the first month’s fees towards your accounts, plus the Companies House charge of £12. We have a new company form to take the details we need for the free company registration service. We’ll also check your answers and get in touch if there’s anything that you might want to change. As specialist startup accountants we know exactly how your company should be setup to save you the most tax.

Registering a new business with HMRC

Any kind of business will need to register with HMRC to submit tax returns and pay any taxes due. That could be for a personal tax return for sole traders and partners. A partnership tax return. Or a corporation tax return for companies. We will do this for you, all included in our low fixed fees.

Payroll

Payroll is the procedure of paying wages to employees. As a startup business you may not need employees for a while. However, if you operate as a company paying a small amount of wages to yourself is usually the best way to pay yourself. However, if that’s over a certain amount, you will need to register for PAYE at HMRC. We will do that for you for no extra charge. We can also help you choose software to do your own payslips etc. Or we can do them for you for a low add-on fee.

VAT

VAT is a tax on the final consumer of non-essential goods and services. Small businesses don’t have to register for VAT which means they suffer any VAT on their costs. However, they can pass on this cost to customers in their prices. Also, they don’t have to add VAT onto their sales prices. Businesses that do register for VAT have to add VAT onto their sales prices. The VAT charged to customers minus the VAT on their costs is payable to HMRC, usually quarterly.

As startup accountants with clients who are growing quickly, we know how important it is to regularly check that your sales don’t exceed the VAT registration threshold. We will explain the rules to you so you know exactly what to check. On all of our accounts packages (except Annual) we will also check this quarterly if you use online accounting software. Also, we know what kinds of businesses can save money by registering for VAT before they have to. When you do need to register for VAT, we will do that for you for no extra fee. You will then need to use accounting software to submit VAT returns. This is a HMRC requirement to comply with the new Making Tax Digital for VAT rules.

Accounting Software

Accounting software will help you do the bookkeeping (see below) and send invoices to customers. As well as being startup accountants, we are also specialists in online accounting software. There are many benefits to using online accounting software, as explained in our guide. Since we started business in 2013 we have dealt exclusively with clients who use online accounting software, including spreadsheets. So we can advise you what’s best to use. That could be spreadsheets such as Excel or Google Sheets. Or low cost software such as Pandle or QuickFile. Or higher end software like Xero and QuickBooks. Unlike many other accountants, you can use whichever accounting software you prefer, and changing software will always be an option.

Bookkeeping

Bookkeeping is listing and categorising all of the business transactions. It’s a requirement to keep your bookkeeping records up to date at all times. By doing this you’ll know how the business is performing and what financial position the business in. We offer bookkeeping services which will give you peace of mind that your records are up to date. It will also provide you with useful reports on the business from the start. However, if you’d like to do the bookkeeping yourself, we can guide you. As well as talking you through it we have some guides. See our bookkeeping using either software or spreadsheets articles.

Startup Accountants Fees

Our startup accountants fees are the same as our normal low fees for a couple of reasons. Firstly, our normal fees are as low as they can go. We keep are costs low and work as efficiently as possible to keep our fees as low as possible. Secondly, you usually need more services and more advice in your first year. So if anything we should be charging you more! Other startup accountants may offer low fees for the first year, but will you be getting the best service if it’s heavily discounted? How much do their fees go up from the second year to compensate? Get a 5 star service from day 1 with CloudBook Online Accountants.

Delving into taxes when it concerns your business can always be a daunting time, and it is not always the most exciting part. However, it always needs to be dealt with at some point. To help you get started, we have gathered a few little tips to guide you on your way.

In this day and age, dealing with taxes can be complex. And whether your business is just starting out, or has been around for a few years, it can always be tricky to establish what is available to you, what you are entitled to, and your financial affairs. Before we get started if you are looking for some in-depth tax-saving tips from online accountants, then have a look at our range of free resources from special tax reports, tax calculators, and tax helpsheets. We can even email these directly to you (promise we won’t spam you).

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1. Meet Deadlines and Stay Organised

One of the first and most important tips we can give you is to always meet your deadlines. Organisation is essential to any workplace. Any delayed filing with Companies House paperwork (confirmation statement), HMRC, FCA, and other regulatory accounts, can result in fines and other consequences. For a business, this can have devastating impacts as can affect your credit rating and banking commitments.

There are many documents you need to keep organised when you are running a business and keeping organised will reduce any hassle. It is also a great idea to map out future dates you need to be aware of. For instance:

Furthermore, make sure you always keep a copy of your documents, such as invoices and receipts in a safe place. According to HMRC, these business records need to be kept for six years, so keep them secure and protected. Also, records and receipts are needed from HMRC to expense claims or input VAT amounts, so make sure your business keeps proper supporting records.

2. Claim Anything You Are Entitled To

Make sure you claim anything you are entitled to such as ‘Capital Allowances’ to help with your business rates. Our friendly group of online accountants can talk you through this. Capital allowances can be claimed against taxable profit, meaning you can receive a reduction in capital expenditure such as business equipment. For example, there are:

AIA is available for British businesses, and is a form of tax relief designated for the purchase of business equipment. AIA applies to businesses of any size, and allows an immediate deduction against profits for capital expenditure up to a certain limit. Most businesses can claim on a portion of expenditure to most types of plant and machinery (except cars).

ECAs encourage business to invest in efficient and environmentally friendly equipment. This scheme allows you to claim 100% first-year allowances such as tax relief in efficient technologies. This will not only reduce investment costs, but your environmental impact. All in all, this will improve your cash flow and the time it takes to pay back your investment. However keep in mind, this can only be claimed for new plant and machinery, not second-hand or used.

Make sure you do some research to find out exactly what you are entitled to. There are multiple options out there that will benefit you and your business, to which you are 100% entitled to.

3. Working From Home?

If you are working from home, or a self-employed business owner you may be able to claim tax relief for:

Furthermore, you can claim a fixed nominal sum of £6 a week with no evidence of your extra costs. There can be many generous tax savings for those of you who work from home. So make sure you research and are aware of them.

4. Be Aware of Illegal Dividends

Dividends are payments for shareholders, directors, or investors for buying the company’s shares or stocks. Any company can pay dividends from retained profits after paying corporation tax and have met all liabilities. However, be aware of illegal dividends, or ‘Ultra Vires’. This can occur after declaring expenses based on bank balance rather than profits, yet dividends should only be paid from profits. Unfortunately, this is not unusual and can result in an overpayment and is costly to sort out at a later date.

5. Talk To Us

Of course there is a lot of information out there which is time consuming, as well as being tricky to navigate. Here at CloudBook Online Accountants, we want to make your life easier. We will work with you from the start to the very end of the year and will assist and support you every step of the way. Whether you are a UK based sole trader, small or medium business owner or property investor. We will help get your finances on track and help you stay organised with an easily reachable, friendly and qualified online accountant.

So, we hope you have discovered some new information about tax and your business. Get in contact with us if you have any questions, or are interested in any services from our online accountants.

This helpsheet gives you an outline of what you need to do when going self employed, and what it really means. There are a number of advantages of going self employed, but you must also comply with various regulations including the tax law and you must register as self employed with HMRC.

Form of Your Business

When you decide to work for yourself you need to choose which form your business will take. The most common forms of business are:

  • Sole-trader – you run the business on your own, usually under your own name;
  • Partnership – you and one or more other people jointly run the business;
  • Limited liability partnership – a special type of partnership that gives you and the other business owners more protection from creditors;
  • Limited company – an organisation that you own and control, which carries out the business on your behalf.

If you start your business as a sole-trader or as a partnership you are legally going self employed.

When you choose to start your business as a limited company you will normally be a director and an employee of that company. You will be employed rather than self-employed, but in practice you will work for your own business.

It is important to understand the difference between being employed by your own company, and being self-employed, as it will affect the tax you pay, and the regulations you have to comply with. This helpsheet deals only with the advantages and regulations of being self-employed.

Tax Advantages Of Going Self Employed

Cash-flow

Once you register as self employed you only have to pay income tax twice a year on 31 January and 31 July. This means you can hang on to your money for longer than an employee who has tax deducted under PAYE from every pay packet.

You must make sure you have the money ready to pay the tax when it is due as you will be charged interest on any tax paid late.

If you work in the construction industry you may have tax deducted from each of your sales invoices by the contractor you work for, under the Construction Industry Scheme (CIS). You may be able to reclaim some of the CIS deductions each year when you submit your tax return.

Expenses to Claim

  • The cost of any goods or services you use fully for your business (sometimes even if you paid for them before going self employed) can be deducted from your sales revenue for tax purposes. Where an item is used partially for your business and partly for private purposes, such as your private car or home, you can claim the business proportion of the costs against your business profits. However, you must be able to justify the business proportion with evidence such as the miles driven, or space used by the business.
  • Capital allowances – if you purchase an item that is expected to last several years, such as a van, you can claim a special deduction known as a capital allowance. The first £250,000 you spend on equipment each year qualifies for 100% capital allowances in the year of purchase. This does not include cars.
  • Loan interest – if you take out a business loan the interest paid on that loan can be deducted from your sales revenue. The loan must be taken out to fund your business, rather than a personal loan or credit card borrowings.

Government Support

  • Government funding – if you live in an area in the UK that has been designated as a regeneration area you may qualify for a government funded programme to help people going self employed or starting their own company.
  • Charitable support is also available from the Prince’s Trust throughout Britain for those aged 18 to 30 who wish to start their own business.
  • Self-employed credit – if you have been registered as unemployed for at least six months you may qualify for a self-employed credit of £50 per week if you start your own business. Ask at your local Jobcentre Plus office for more details.
  • Working and child tax credits – You may qualify for these after going self employed. Your tax credit award is based on your family’s joint income including your self-employed profits, but it will also be determined by the number of hours worked by the adults in the family, and the number of children aged under 16.

Your Tax Obligations

Tell the Taxman

When you start your own business you must register as self employed with the Taxman (HMRC). It is best to do this as soon as possible after you start to charge your customers for the goods you sell or for the services you provide. There are a few ways to register as self employed…

You must register as self employed even if you make a loss from your business. Every partner in a partnership business must register as self employed separately. If you do not register with the Taxman by 5th October following the end of the tax year in which you started your business you may be charged a penalty of up to 100% of the tax and national insurance you do not pay as a result of the failure to notify.

National Insurance

If you’re going self-employed you will need to pay two types of national insurance contributions (NICs) known as class 2 and class 4.

Tax Returns

You must complete a self-assessment tax return every year to report the income and expenses from your self employed business and any other income you have to the Tax Office.

Register for VAT

When your sales for 12 months reach the compulsory VAT threshold, you must register for VAT within 30 days.

How We Can Help You

If you’re thinking of going self employed or already have done, it’s never too soon or late to talk to us. We can help you register as self employed with the Tax Office for tax, national insurance and VAT. We can show you how to keep accurate records for your business and complete tax and VAT returns. As your business grows we can discuss tax planning ideas with you to ensure your tax bills are kept as low as possible.

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