Allowable business expenses
In the UK, allowable business expenses are costs you can deduct from your income to calculate your taxable profit.
Here are some examples of allowable expenses for Corporation Tax:
- Office costs: Such as stationery or phone bills
- Travel costs: For example, fuel, parking, train or bus fares
- Clothing expenses: Uniforms and protective clothing
- Staff costs: Salaries or subcontractorcosts3
- Things you buy to sell on Direct costs of goods or raw materials
- Financial costs,: Such as insurance or bank charges
- Costs of your business premise, Such as heating, lighting, and business rates
- Advertising or marketing: For example, website costs
- Training courses related to your business, for instance, refresher courses
- You can also claim capital allowances if you buy assets, such as equipment, machinery, and business vehicles, that you keep to use in your business.
However, some expenses are not allowed for Corporation Tax, such as entertaining clients. These should be added back to your profits when you prepare your Company Tax Return. This is a general guide, and the specifics may vary depending on your business circumstances.
Good idea to consult with our accountant to ensure you’re claiming all the allowable expenses relevant to your business.
What are allowable expenses?
Allowable business expenses are purchased products or services that help keep a business running. Examples include stationery, phone bills, and travel costs to name a few. They are deducted from income when calculating taxable profit which means you don’t pay tax on these items.
How business expenses work
There are different categories of expenses, but revenue expenses are some of the most common business costs in an accounting period. These tend to be short-term purchases, often used immediately, and for general operational matters.
Expenditure on assets that are likely to have lasting benefits (of say a year or more), such as IT or office furniture, are referred to as capital expenses. Capital expenditures qualify for another form of tax relief known as capital allowances.