Frequently Asked Questions
Although we know that each person’s tax affairs are unique to them, we have compiled a list of frequently asked questions to give you the quick answers you might need.
This is a very common question with a very simple answer. HMRC allow you to make a tax deduction for all expenses that are incurred wholly and exclusively for the purpose of running your business.
For example, as an accountant, we couldn’t make a tax deduction for a spanner because we don’t need one to perform our job role. However, an electrician would need a spanner to perform their job role, and hence this is tax deductible item for them.
If you are running a commercial vehicle through your business (for example a van or a truck), then all of the costs associated with fuelling, servicing and repairing that vehicle are tax deductible.
If you are using a car for business purposes then you can’t claim for the actual running costs, but you can make a claim for the business miles you travel in that car. The current rate is 45p per mile for the first 10,000 miles and then 25p a mile thereafter.
The short answer to this is no, not really. The only time you can claim for food or drink costs is when you have had to travel for business outside of your usual parameters, where taking your own food would be seen as impractical.
For example, if you regularly work in Kent but get a job doing some work in Liverpool for a week, the costs of travelling to Liverpool, staying overnight, and feeding yourself, would all be tax deductible costs.
Again, the short answer to this question is no. Purchasing drinks for preparation and consumption in the work place is deductible, but purchasing drinks on the go are not.
You can certainly take people out for coffees when you are having business meetings, but those costs are technically classified as “entertaining” costs which are not allowable for tax purposes.
This depends entirely on who you are. If you are an employee then you are currently entitled to claim £6 per week for working at home without any supporting evidence.
If you are a sole trader or limited company then the claim you make will depend on whether you have a dedicated home office room, or whether you use your laptop on your sofa or the dining room table.
If you have a dedicated home office room then you can claim a proportion of your household bills as a tax deductible expense, but if you don’t then you can use the HMRC flat rate claim without the need for any supporting evidence (currently £10 - £26 per month depending on how many hours you work from home each month).
There are varying ways in which you can withdraw money from your limited company. The simplest ways are as follows:
- Declare a salary – taking money as a salary will have an impact on your income tax position, but it will also reduce your company profits, which will in turn reduce your liability to corporation tax.
- Take a dividend – taking money as a dividend will also have an impact on your income tax position. You also need to make sure that there are enough distributable reserves in the company to allow you to take the dividend or else there will be additional tax implications.
- Repay your directors loan – if you injected money into your company during the set up phase then you can repay this money to yourself at any time without any additional income tax implications.
- Reimbursement of expenses – if you pay for something personally that should have come out of the business account then the company can reimburse you for those costs. Again, this won’t have any income tax implications.
Technically, so long as you have enough cash in the business to cover the company’s tax liabilities (including in-year corporation tax) at any point, then everything else is available for withdrawal. Just because this is technically true doesn’t mean that it’s the best thing for you to do.
Remember that if you withdraw a salary or dividend from your company then you will have to pay income tax on those withdrawals, so before extracting money, please speak to your accountant first.
You don’t technically have to be VAT registered until your taxable turnover reaches £85,000 in any 12 month rolling period.
However, there are other commercial factors that might dictate that you register before this point (for example, if you are selling zero rated supplies or if your customer base dictates VAT registration).
