Benefits Archives - Bloom Financials

Maximizing Tax Deductions: A Comprehensive List

by Abdul Wahab | Oct 12, 2024 | Accounting

For small business owners and freelancers in the UK, maximizing tax deductions can significantly reduce the amount of tax you owe and keep more money within your business. Knowing which expenses you can deduct will help you avoid leaving money on the table. This guide will cover essential tax deductions for UK businesses, freelancers, and self-employed individuals, so you can optimize your tax return.

Why Maximizing Tax Deductions is Important

Tax deductions lower your taxable income, reducing the amount of tax you pay to HM Revenue & Customs (HMRC). Staying informed about allowable deductions can help improve your cash flow and profitability while ensuring compliance with UK tax laws.

1. Home Office Deduction

If you work from home, you can claim a portion of your home expenses as a business expense. This includes costs for utilities, rent, or mortgage interest. You can either claim Simplified Expenses (a flat rate based on hours worked) or the actual expenses method for more accurate claims.

Tip: Keep records of your working hours and household expenses to justify the claim.
Learn more: Claiming business expenses if you’re self-employed

2. Office Equipment and Supplies

Purchases made for business purposes, such as computers, printers, software, and office furniture, are often tax-deductible. These fall under capital allowances, and you can claim the full or partial cost of these items through Annual Investment Allowance (AIA).

Tip: Keep detailed receipts for all office equipment purchases.
Learn more: Claiming capital allowances

3. Vehicle and Mileage Expenses

If you use your vehicle for business purposes, you can deduct vehicle-related costs such as fuel, maintenance, insurance, and even parking fees. The UK allows you to choose between two methods:

Simplified Mileage Allowance: Claim a flat rate per mile (45p for the first 10,000 miles and 25p after).
Actual Costs: Deduct a percentage of the actual expenses related to business use.
Tip: Keep a mileage log or use an app to track business trips.

4. Travel and Accommodation

When travelling for business purposes (conferences, client meetings, etc.), you can deduct expenses for transport, hotel stays, and even meals while travelling. Be cautious, though—personal travel costs are not deductible.

Tip: Ensure that travel and accommodation expenses are solely business-related.
Learn more: Business travel expenses

5. Marketing and Advertising Costs

Costs related to promoting your business are tax-deductible. This includes online advertising (Google Ads, social media), print marketing materials (brochures, business cards), and website development.

Tip: Track all marketing costs throughout the year to claim the full deduction.
Learn more: Ma rketing and advertising expenses

6. Professional Fees

Payments made to accountants, solicitors, or consultants for professional services are deductible. For instance, if you hire an accountant to file your taxes or seek legal advice for contracts, these fees can reduce your taxable income.

Tip: Keep detailed invoices for any professional services used.
Learn more: Professional services expenses

7. Staff Salaries and Benefits

If you employ staff, you can deduct salaries, wages, and employer National Insurance contributions (NICs). You can also deduct the costs of providing employee benefits, such as pensions, health insurance, or bonuses.

Tip: Maintain accurate payroll records to ensure proper reporting.
Learn more: Employer costs and benefits

8. Insurance Premiums

Insurance policies that protect your business are generally tax-deductible. This includes:

Professional indemnity insurance
Public liability insurance
Employer’s liability insurance
Tip: Ensure you only claim for business-related insurance policies.
Learn more: Insurance expenses for businesses

9. Utilities and Rent for Business Premises

If you rent an office or business premises, you can claim deductions for rent and utilities such as electricity, water, and broadband. If you’re working from home, only the business portion of these costs is deductible.

Tip: Track and allocate the exact proportion of utility costs used for business purposes.
Learn more: Rent and utilities for business premises

10. Training and Development

Costs incurred for job-related training or professional development are deductible. This includes conferences, courses, and certifications that enhance your business skills or those of your employees.

Tip: Ensure the training is directly related to your business operations.
Learn more: Training and development expenses

11. Charitable Contributions

If your business donates to registered charities, those contributions may be deductible. Be sure the charity is registered with HMRC to qualify for the deduction.

Tip: Keep receipts or acknowledgment letters from the charities to support your claim.
Learn more: Charitable donations by businesses

12. Bad Debts

If your business extends credit to customers and fails to receive payment, you may be able to claim bad debt relief. This deduction helps offset losses from unpaid invoices.

Tip: Keep records of invoices and documentation proving that the debt is unlikely to be recovered.
Learn more: Claiming bad debt relief

13. Subscriptions and Memberships

If your business subscribes to trade publications, industry memberships, or professional associations, these expenses are tax-deductible. Subscriptions related to your business niche can help you stay informed and connected.

Tip: Ensure subscriptions are directly linked to your industry or profession.
Learn more: Allowable expenses for subscriptions

Conclusion: Maximize Your Tax Deductions

Maximizing tax deductions is essential for reducing your tax liability and keeping more money in your business. By staying informed about the various deductions allowed by HMRC—from home office expenses to marketing costs—you can make the most of available tax breaks. Make sure to keep detailed records and consider working with a tax professional to ensure you’re claiming all eligible deductions.

Need help optimizing your tax deductions? Co ntact us to speak with one of our accounting experts and learn how we can help maximize your tax savings.

What are benefits in kind? Introduction & tax guide

by Abdul Wahab | Nov 16, 2021 | Uncategorized

Today companies provide their employees with various types of added benefits. Any benefit that you receive as an employee in addition to your basic salary is the Benefit in Kind from your employer. It can also be regarded as the benefit that you can use both in your personal time as well as the business hours and is referred to as a perk or the ‘fringe benefits’, that may be a vehicle provided by your company for both the office as well as the personal use. Although this all seems a nice added bonus, the noticeable thing is that it all may not necessarily go for free, and HRMC will need you to pay tax.

Moreover, this can be challenging for self-employed or employers to understand the rules about benefit in kind tax. Benefits are usually tax-free, while such are taxable, making it complicated to assess which rules apply to your situation according to your benefits. We are providing a quick guide here to make such things easier to understand.

What does benefit in kind mean?

These are the benefits that a company provides to their director or employee besides their wages or salary.

A company car, any residence accommodation by company, private medical insurance, or non-business travel are all examples of benefit in kind (BIK). Such benefits in kind that have a monetary value involved may be subjected to taxes, and you will be demanded to report HMRC as well.

Tax-free or non-taxable benefits in kind?

These are the most common benefits in kind you receive from the company or employer. In such cases, both the employee and employer are not demanded to pay the tax. Here are a few examples of non-taxable benefits in kind:

Subsidies meals provided to the employees at the canteen
Various entertainment facilities
Pension payments
Various other sports and safety facilities are available at the workplace
Expenses for transportation, e.g. public bus services

Taxable benefits in kind

Vehicles provided by the company that is also allowed for personal use
Fuel for personal use
Accommodation having no rent or less rent than the market value
Fees of the children of employees
Private medical insurance
Loans from the company that is interest-free or discounted
Expenses for non-business travel

How to figure out what tax is to pay on a benefit in kind?

The rules to determine what tax needs to be paid or not are diversified to understand. It all depends on what benefits are being received or offered. When you are receiving a benefit in kind as an employee, you have to pay income tax for it.

To calculate how much you will pay, apply the income tax rate band according to your income tax to the taxable value of the benefit you are being offered. The band defines that you have to pay 20% if it stands under the basic rate; for the higher rate, it is 40%, and for the additional rate, it is 45%. A rule also says the employer providing the benefit in kind to his employee will also have to pay tax in the form of the employer’s NI at a rate of 13.8 per cent of the benefit’s taxable value.

Reporting and paying tax on benefits in kind

At the end of each year, all the employers are asked to report their employees’ benefits. They are responsible for this reporting.

Ways to report and pay tax:

There are two ways to report and tax the benefits

P11D form submission

This is a tax form that keeps all the records of the employment benefits that the directors, as well as other employees, receive from the company over the year. The employer is responsible for submitting a P11D form for each employee receiving the benefits or expenses. Self-employed are considered both the employee and employer, which means they also need to fill out the P11D form. The form provides a list of all possible benefits which the employer simply selects the relevant ones and states the value of the benefit that was provided to the employee.

The P11D(b) form is also required to submit by you in the following conditions:

If you have submitted any P11D forms
The benefits or expenses of the employee have been paid through your payroll
HMRC has reminded you to report

The P11D(b) form must be submitted alongside the P11D and this allows for employers to pay their NI on the BIKs.

2.Paying tax through payroll

The tax on benefits provided to the employees can also be deducted and paid through the payroll.

For this, you need to get yourself registered with HMRC before the tax year starts (6^th April). And an important thing to note down here is you do not need to submit the P11D form in this case, but the P11D(b) will still be required to be submitted.

For employees, income tax is charged on the BIK. The payment for this will be automatically deducted via your payroll and so there is nothing you need to do.

This guide helps make things a little easier to understand what the benefits in kind are, what benefits are taxable and what are not, what are the tax calculations, and how to report and pay off taxes as well. It also explains the complications of the procedure to assess the tax rules and accurately understand the benefits in kind tax calculations.

This demanding and hectic procedure needs time and expertise. Also, analysing the case of each employee who is being provided with benefits in kind may be confusing. Furthermore, reporting the taxes, filling out the P11D and P11D(b) forms, and paying off the taxes is a complex task to do by the employers and self-employed persons. Here you need experts who can perform all these tasks efficiently and precisely. Our company ‘Bloom Financials’ also provides its expertise in taxation regarding the benefit in kind. Employers, self-employed persons, and even employees can get help to make this procedure easier and swift.

office@bloomfinancials.com +44 203 002 0885