“Can I claim this?”
It is a question we hear multiple times everyday from our trades businesses.
Whether it is new equipment, a tank of fuel, company van or a cup of coffee on your way to a job, most trades business owners want to know if it can be claimed against their taxes.
Now, the good news is, most everyday expenses are tax deductible, however the challenging part of this is knowing where to draw the line.
All businesses are different however, there is one thing that sits behind every expense that is allowed.
We call it “The Golden Rule”
HMRC’s starting point is pretty simple. A claimable expense must be wholly & exclusively for the purpose of your business only. In simple terms, if the expense only occurred because of your business, it's generally allowable. That’s why some expenses are clearly an expense whereas others depend more on how they are used.
Understanding this rule will help you make better decisions instead of having to do a google search everytime you buy something.
Common expenses Trades business owners can actually claim.
If you run a roofing, plumbing, electrical, joinery, decorating or general building business, you'll probably face many of the following costs. These are all expenses that are normally claimable, providing they are 100% for business purposes.
Tools & Equipment Hand tools, power tools, and any equipment used to carry out your trade are usually allowable. Depending on the type and cost of this equipment the tax treatment can be different, but they are all deductible as they are legitimate purchases made for your trade.
Materials & Supplies Materials purchased for customer jobs are a normal business expense. This includes everything from plaster board and wood to bolts and screws etc.
Van running costs If your van is used for your business you can usually claim costs such as Fuel, Repairs, MOTs, services, insurance, vehicle tax, tyres. However, if the vehicle is also used for day to day trips like dropping the kids at school different rules may apply, so it's important to keep good records.
Protective clothing & PPE Items such as hard hats, reflective clothing, protective eyewear, safety boots and other protective equipment are usually allowable. Branded workwear can also apply as it's specifically for your business rather than everyday wear.
Phones & Technology Most trades businesses rely heavily on their phones. Business mobile phones, tablets, laptops and other equipment used to run your business are generally allowable, along with software subscriptions that help you manage your jobs invoices and customers. However, this does not mean you should purchase the latest iphone for your own daily use and attempt to pass it off as a business expense.
Advertising & Marketing Winning new work is going to cost you money. Typical expenses you are allowed to claim for marketing are website costs, social media advertising, printed leaflets, business cards, branded clothing, photography & video content etc. Marketing is one of the best claimable investments a trades business can make.
Professional services & advice Many trades business owners often forget professional advice is still a business expense. This could include Accountancy fees, Bookkeeping, payroll services, legal advice, business insurance and software subscriptions. These are all parts of running a well managed business.
Expenses that often cause confusion
There are quite a few purchases that can cause a bit of a grey area. They are not automatically allowable or disallowable, it depends on why they were purchased and how they were used.
Clothing One of the most common misconceptions trades business owners make is that all work clothes are claimable. Unfortunately this is not the case. A branded polo or protective workwear is generally different from everyday clothing, even if you only wear this clothing to work. A pair of jeans or trainers usually won't qualify just because you wear them onsite.
Food & Drink This is another area where trades business owners usually get caught out. Buying lunch because you're hungry at a job isn't usually a business expense. However, there are situations where meals you have purchased while traveling for qualifying business purposes could be allowable. The rules depend heavily on circumstances, which is why its worth checking if you’re unsure.
Home office costs If you complete admin, paperwork and quotes from your home, you may be able to claim some household costs. The amount depends on your individual circumstances and how your home is used for your business.
Fuel If you use your personal vehicle for business journeys you may be able to claim business mileage or a proportion of your running costs, depending on how your business operates. If you keep an accurate record of your mileage this will be much easier.
Don't let the small expenses tie you up.
One mistake we see all the time is trades business owners getting worked up and spending hours worrying about tiny purchases. “Can I claim this £8 receipt?” “Does this £15 item count?”.
While it is very important to keep good records of your business expenses, these questions often distract from the decisions that have a much larger impact on your finances.
For example:
Are your jobs priced correctly?
Do you know which jobs are the most profitable?
Are customers paying on time?
Are you putting enough money aside for tax?
Are you recovering increases in rising material costs?
Getting those decisions right will help you far more than chasing every receipt. That’s where we can help.
Keep good records from day one
Claiming expenses becomes much easier when your records are organised well.
We recommend:
Keeping business and personal spending separate.
Taking photos of receipts as soon as you receive them and creating a folder for these.
Using accounting software to record purchases regularly.
Reconciling your accounts throughout the year instead of waiting until the year end.
Good records won't just make your tax returns easier, they also give you a better picture of how your business is performing.
When should you ask your accountant?
If you're ever unsure about whether something is allowable or not, just ask. It's much easier to answer a quick question than it is to fix mistakes months later. Tax rules can vary depending on how your business is structured, whether you're a sole trader or a limited company and exactly how an expense is used. Getting advice early on helps you stay compliant and gives you confidence that you're claiming everything you're entitled to without claiming things you shouldn't. This is exactly where Acumenica can help.
The bottom line
Most trades business owners don't want to spend their evenings reading tax legislation. They just want to have peace of mind that they're doing things properly. Understanding the basic principles behind business expenses can help you make better informed decisions, avoid costly mistakes and ensure you're claiming what you're entitled to. At Acumenica, we don't just help clients prepare their accounts at the end of the year. We help them understand their numbers throughout the year so they can make better decisions with confidence.
If you're ever wondering whether an expense is allowable or you'd simply like someone to take over the stress of accounting and tax off your plate, we're always happy to help.
