Business expense claims – avoid these mistakes

Incomplete records. To claim expenses, you must keep your receipts and add the business purpose. You can’t simply give a vague description. The best solution is to immediately scan and add receipts to your accounting software. It’s easy to do with tools like Dext. 

 

Coding. In most accounting software, like Xero, it’s easy to set up codes for different types of expense. This is an efficient way to make sure you claim allowable expenses, but don’t add costs you can’t claim for. This saves a lot of time when preparing your company accounts and self-assessment tax return. Your bookkeeper can help you set up the codes you need. 

 

Personal spending. It’s very easy to mix up your personal and business spending. To prevent this, you need a separate business bank account with its own debit or credit card. It’s the best way to make sure you don’t accidentally add your family’s Sunday lunch at a restaurant to your business expenses. HMRC will certainly notice! 

 

Food. Generally, you can claim for food and drink while you’re travelling on business. However, there are different rules if you’re self-employed or an employee, even if you work for your own limited company. It’s always best to check. 

 

Hospitality. Entertainment is good for building relationships with both employees and clients. In most cases, client entertainment isn’t an allowable expense. You can organise staff parties without tax implications when the total per employee isn’t more than £150 per year. After that, it gets more complicated. 

 

Subscriptions and regular expenses. It’s easy to forget to include subscriptions for software or consumable items like printer ink. Over the year, these can mount up, so it’s worth reviewing regularly. 

 

Vehicle costs. If you use your car for both business and personal trips, you can’t claim all the running costs. You need to record your business mileage and only claim part of your vehicle costs. 

 

Working from home. If you work from home, you can claim some of your household running costs. You can claim £6 per week or your actual costs (but you must keep good records). 

 

Making sure you manage your business expenses properly is becoming more important. HMRC says it will launch more enquiries to check that sole traders, partners and landlords only claim deductions for business-related expenses. They will look closely at whether your expenses are ‘wholly and exclusively’ for business purposes. Automatic reviews will apply to expenses over £2,500 per year.