To help reduce your tax bill, you can offset many of your business expenses against your business income. You'll need to keep good records and hold on to your receipts.
They know all the things you can claim for.
Expenses are the costs you incur in the day-to-day running of your business. At tax time, your total profit (the amount you need to pay tax on) is your taxable income minus the expenses you can claim — so the more you can claim, the less tax you have to pay.
Business expenses can include:
If you work from home, you can also claim for part of many of your household expenses — like mortgage interest, your phone line and your electricity bills. See Inland Revenue for more information about using your home for business (external link) .
You can't claim 100% of the cost for all items, even those exclusively for business use — some things you can only claim half for, eg some entertainment expenses. Inland Revenue has a booklet on entertainment expenses (external link) .
This means you’ll have a paper (or electronic) trail at claims time. If you use accounting software, everything will be coded and added up automatically.
You claim your business expenses annually in your tax return. You'll need to know the total amount for each type of expense you're claiming, and enter it into the relevant box on the form.
If you use accounting software, most of it will be done for you — you'll just need to keep your receipts to back up your electronic files.
You don't need to provide your receipts with your return — but you need to keep them somewhere well organised and easy to find for at least seven years, in case Inland Revenue asks to see them.
If you keep electronic records, you can photograph your receipts and keep them with your other records — but you should keep the paper copies too.
Keeping good records makes doing your tax return and claiming expenses much easier.
Records you may need to keep include:
These must be in English, unless you get approval from Inland Revenue to use another language.
Avoid these common pitfalls when claiming expenses: