If you feel like you might be leaving money on the table at tax time, you are not alone. Many small business owners pay more tax than they need to, simply because they are unsure what counts as allowable expenses or how to keep tidy records.
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What HMRC means by “allowable expenses”
Allowable expenses are costs that are “wholly and exclusively” for your trade. If an expense has a personal element, you can only claim the business portion.
You cannot claim for everyday personal costs. You can claim for costs that help you run, market, or deliver your work. Good records are key. If you can show what you spent and why it relates to your business, you are on safer ground.
How to pay less tax as a business owner
There is no magic trick. Paying less tax comes from steady habits and good planning.
- Claim the right expenses, in the right category.
- Use capital allowances for equipment.
- Plan your pay and dividends if you are a director.
- Make pension contributions where suitable.
- Keep accurate, timely records to avoid missed claims.
- Speak to a professional before year-end, not after.
If you would like practical help, we are friendly, local, and plain speaking. When you need a hand, a trusted partner matters. Many local business owners search for an accountant in Bedford to get personal guidance that fits their setup.
What business allowable expenses can you claim?
Here are the common categories that often apply to both sole traders and limited companies.
- Office and admin: stationery, software, postage, printing, bank charges, broadband and phone costs used for work.
- Premises: rent, business rates, light and heat, security, cleaning. For home working, see the section below on apportioning.
- Travel for business: public transport, mileage for your own car, parking, tolls, overnight stays. You cannot claim home to regular workplace travel.
- Marketing: website costs, design, ads, printing of flyers, networking fees.
- Professional fees: accountants, legal advice for the business, training that keeps your skills current.
- Staff costs: wages, employer pension contributions, employer National Insurance, recruitment fees.
- Insurance: professional indemnity, public liability, employer’s liability.
- Equipment: laptops, phones, tools. These may be capital items that qualify for capital allowances.
- Subscriptions: trade bodies, industry publications.
Keep receipts and short notes explaining the business purpose. This makes claims easier to support if HMRC asks.
Sole traders, self-employed: how much can you claim?
You can claim as much as is reasonable and provable for business use. There is no fixed pound limit on total expenses. The key is that the cost must be for your trade, and you must keep evidence.
A few helpful points:
- Home office: you can use HMRC’s simplified flat rate for working from home, or apportion actual costs, such as heat, light, and broadband. Use a fair method, for example by room and time used.
- Vehicle costs: either use HMRC’s approved mileage rates, or claim a fair split of actual running costs, not both. Mileage is simpler for many.
- Mobile phone and internet: claim the business share. Keep a simple log if usage is mixed.
- Training: you can usually claim for courses that maintain or update existing skills. Training to start a new trade is different. Ask if unsure.
- Capital allowances: for items with useful life beyond a year, you may claim Annual Investment Allowance or writing down allowances. This spreads or accelerates relief in a tax-efficient way.
Limited companies: what is different?
The list of allowable costs is similar, but the tax and pay structure changes.
- Salaries and employer costs: wages, employer National Insurance, and pension contributions for staff and directors are deductible for Corporation Tax.
- Director pay mix: small salary plus dividends can be tax-efficient, within the rules. Plan this before the year closes.
- Trivial benefits: small non-cash gifts to staff and directors may be allowed within limits. Keep records.
- Staff expenses: travel, subsistence during business trips, and certain staff events can be allowable if you meet HMRC criteria.
- Capital allowances and full expensing: certain equipment may qualify for enhanced relief. Timing purchases can help cashflow and tax planning.
A quick planning chat a few months before the year-end often pays for itself. If you want simple guidance on where to start, our team of accountants in bedford can map the options to your situation.
What is a tax break for business?
A tax break reduces the tax you pay. In practice, this can mean:
- Allowable expenses that lower your profit.
- Capital allowances that reduce taxable profit for equipment.
- Pension contributions, within limits, that reduce Corporation Tax for companies or income tax for individuals.
- Reliefs and allowances, such as the Annual Investment Allowance for qualifying assets.
None of these require risky schemes. They rely on clear rules, good records, and planning your timing.
Record-keeping that saves tax
You do not need complex systems. You do need consistency.
- Keep every receipt. Digital copies are fine if clear.
- Match each cost to a simple category.
- Add a short note for the business purpose.
- Do a quick monthly check of your bank and card statements.
- Store records for at least six years.
Cloud software makes this easier. If you are weighing up tools, our plain-English guide to Xero vs Quickbooks can help you choose without fuss.
Common mistakes to avoid
- Mixing personal and business spending in one account. Open a separate account.
- Forgetting small items like parking, mileage, software, and subscriptions. These add up.
- Claiming full costs where use is mixed. Use fair splits.
- Leaving it until the deadline rush. Little and often keeps things tidy.
- Buying big items without checking the tax impact and timing. A short chat first can avoid surprises.
Simple, proactive tax strategies
You asked how to pay less tax. Here is a short, clear plan you can use this week.
- List your top five regular costs, then check if you are claiming them fully and fairly.
- Review your vehicle method, mileage or actual costs, and pick the one that suits you best for the current year.
- If you work from home, choose a method for apportioning and apply it consistently.
- Note any equipment you plan to buy this year. Check if capital allowances or full expensing apply before you purchase.
- Set a calendar reminder for a pre year-end review. Two to three months before is ideal.
For a deeper dive into often missed claims, our guide on tax deduction strategies covers practical examples you can apply right away.
Quick answers to your questions
- How to pay less tax as a business owner? Claim all allowable expenses, plan capital purchases, consider pension contributions, and review your pay mix if you are a director. Keep tight records and review before year-end.
- What business expenses can you claim? Costs that are wholly and exclusively for business, such as travel, marketing, professional fees, software, insurance, and equipment, with fair apportionment where there is mixed use.
- How much can you claim as self-employed? There is no fixed cap. Claim the genuine business portion and keep evidence.
- What is the tax break for business? Allowances and reliefs that reduce taxable profit, such as capital allowances and pension contributions, plus day-to-day allowable expenses.
Final thoughts
You do not need to be a tax expert to keep more of what you earn. Stay consistent with records, claim fairly, and plan a little ahead. That is the path to paying the right amount of tax, not more.
If you would like a friendly check on your setup, we are happy to help; our website has simple guides and local support, or have a chat with our team of local accountants in Bedford. And if you prefer to DIY, join our mailing list for clear updates so you never miss a change that could save you money.
