Running a small business in the UK comes with its fair share of expenses, but did you know that many business owners fail to claim valuable tax deductions? Maximising your allowable expenses can reduce your tax bill and improve cash flow. Here are some of the most commonly overlooked tax deductions for small businesses.
1. Home Office Expenses
If you work from home, you can claim a portion of household expenses such as:
- Rent or mortgage interest
- Utility bills (electricity, gas, water)
- Council tax
- Broadband and phone costs
HMRC provides a simplified expenses option, where you can claim a flat rate based on hours worked from home, or you can calculate the exact proportion of costs related to business use.
2. Professional Subscriptions & Memberships
If you belong to a professional organisation related to your trade, you may be able to deduct membership fees. Examples include:
- Chartered Institute of Management Accountants (CIMA)
- Federation of Small Businesses (FSB)
- Industry-specific regulatory bodies
These expenses are allowable as long as the membership is wholly and exclusively for business purposes.
3. Business Mileage & Travel Costs
If you use your personal car for business purposes, you can claim mileage expenses. HMRC’s approved mileage ratesfor 2023/24 are:
- 45p per mile for the first 10,000 miles
- 25p per mile thereafter
Alternatively, public transport fares, taxi costs, and overnight accommodation for business travel are also deductible.
4. Office Equipment & Software Subscriptions
Many business owners forget to claim costs related to:
- Laptops, printers, and office furniture
- Business software (e.g., Microsoft 365, QuickBooks, Xero)
- Website hosting and domain registration
These expenses fall under capital allowances or allowable expenses, depending on their usage.
5. Advertising & Marketing Costs
If you invest in promoting your business, these costs are fully deductible. Examples include:
- Social media ads (Facebook, Instagram, LinkedIn)
- Google Ads campaigns
- Printing flyers, business cards, or banners
- SEO and website development services
Marketing is crucial for business growth, so don’t miss out on claiming these costs.
6. Training & Development
If you pay for courses, seminars, or training to improve your business skills, these may be tax-deductible. However, the training must be relevant to your existing trade. Courses to expand into a new business area typically don’t qualify.
7. Bad Debts
If a customer refuses to pay and the debt is genuinely unrecoverable, you may be able to write it off as a bad debt expense. This helps reduce your taxable profit and ease financial strain.
8. Business Insurance
Essential business insurance policies are fully deductible, including:
- Public liability insurance
- Professional indemnity insurance
- Employers’ liability insurance
- Cybersecurity insurance
These costs protect your business and should always be included in your deductions.
9. Bank & Payment Processing Fees
Small businesses often pay fees for:
- Business bank accounts
- Payment processing (PayPal, Stripe, SumUp)
- Loan and credit card interest (if used for business)
These costs are fully deductible, reducing your taxable profits.
10. Employee Benefits & Salaries
If you have employees, you can deduct costs such as:
- Salaries and wages
- National Insurance contributions
- Pension contributions (if under a registered scheme)
- Employee benefits like company mobile phones or staff events
Hiring staff is a significant expense, so ensuring you claim all allowable deductions is vital.
Final Thoughts
Many small business owners unknowingly overpay tax by missing out on deductions they’re entitled to. Keeping accurate records and consulting a tax professional can help you optimise your expenses and reduce your tax bill.
Need help navigating UK business tax deductions? Our team of accounting experts is here to assist you! Contact us today for personalised tax advice.