Personally paid expenses vs company paid expenses

Chris Andreou

May 3, 2021

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Contractors

Where possible, it is advisable to cover any company expenditure directly using company funds, such as making a payment directly via the company bank account. This ensures that all company transactions are kept in one place, and can be easily tracked.

If you're paying for business expenses through your personal funds, it helps to establish a process for expense tracking and claiming (just as you would, if you were to make a claim from an employer). It's best to set aside time to manage your expense claims on a regular basis, such as once a month or fortnight. You can keep track of your expenses by using a spreadsheet, or through apps such as Expensify.

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What is the 24 month / 2 year rule for expenses? Guide

What is the 24 month / 2 year rule for expenses?

The 24-month rule, also referred to as the two-year rule, enables contractors to claim travel expenses from their home to a client's office, as long as it is classed as a "temporary workplace".

The following conditions must apply for a work location to be classed as a "temporary workplace"

  • The period of engagement is less than 24 months
  • The contractor should spend less than 40 percent of their time at the workplace

Essentially, if you work at the client's office for more than 24 months, or spend more than 40 percent of your time at the location, it is considered a permanent workplace-and as such, you won't be able to claim travel or subsistence expenses.

Bear in mind that this is subject to the SDC legislation introduced in April 2016. Further elaboration on SDC can be found in our guide to claiming expenses as an umbrella company contractor.

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What expenses can I claim as a Limited Company Director? Guide

What expenses can I claim as a Limited Company Director?

As a limited company director, there are various allowable business expenses you can claim for. These include (and aren't limited to):

  • Pension contributions
  • Staff expenses
  • Business mileage
  • Mobile phone, landline and broadband expenses
  • Costs of forming your company

Further information on the types of expenses you can claim for can be found in our limited company expenses and tax allowances guide.

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What is the 24 Month Rule for Directors Expenses? Guide

What is the 24 Month Rule for Directors Expenses?

The 24-month rule, also referred to as the two-year rule, enables contractors to claim travel expenses from their home to a client's office, as long as it is classed as a "temporary workplace".

The following conditions must apply for a work location to be classed as a "temporary workplace"

  • The period of engagement is less than 24 months
  • The contractor should spend less than 40 percent of their time at the workplace

Essentially, if you work at the client's office for more than 24 months, or spend more than 40 percent of your time at the location, it is considered a permanent workplace-and as such, you won't be able to claim travel or subsistence expenses.

Bear in mind that this is subject to the SDC legislation introduced in April 2016. Further elaboration on SDC can be found in our guide to claiming expenses as an umbrella company contractor.

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Can I claim for fuel as well as mileage? Guide

Can I claim for fuel as well as mileage?

Mileage claims are designed to help cover your fuel costs, as well as the running costs of having a vehicle. As such, you can't make separate claims for individual expenses such as fuel, electricity or vehicle repairs.

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What are the HMRC approved mileage rates? Guide

What are the HMRC approved mileage rates?

The HMRC approved mileage rates are as follows:

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Can I expense my home office? Guide

Can I expense my home office?

There are two methods you can use to work out your allowable home expenses: you can claim a flat rate allowance (also known as simplified expenses), or claim a proportion of your bills. For further information on these methods, refer to our expenses and allowances guide for limited company directors and the self-employed.

If you're a sole trader and aren't sure which method is the better option for your business, you can use Gov.uk's simplified expenses checker tool.

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Can I expense Stationery? Guide

Can I expense Stationery?

Yes, you can claim office costs (such as the purchase of stationery) as a deductible expense.

For further information on allowable business expenses, refer to our expenses and allowances guides for limited company directors and the self-employed.

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Can I expense Postage? Guide

Can I expense Postage?

You can claim postage costs as a business expense.

For further information on allowable business expenses, refer to our expenses and allowances guides for limited company directors and the self-employed.

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Can I expense my use of home as an office? Guide

Can I expense my use of home as an office?

There are two methods you can use to work out your allowable home expenses: you can claim a flat rate allowance (also known as simplified expenses), or claim a proportion of your bills. For further information on these methods, refer to our expenses and allowances guide for limited company directors and the self-employed.

If you're a sole trader and aren't sure which method is the better option for your business, you can use Gov.uk's simplified expenses checker tool.

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Can I expense Legal costs? Guide

Can I expense Legal costs?

The costs incurred for engaging professional services-such as hiring a lawyer-can be claimed as an allowable expense, as long as these services are carried out solely for business purposes.

For further information on allowable business expenses, refer to our expenses and allowances guides for limited company directors and the self-employed.

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Can I expense Business gifts? Guide

Can I expense Business gifts?

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Personally paid expenses vs company paid expenses Guide

Personally paid expenses vs company paid expenses

Where possible, it is advisable to cover any company expenditure directly using company funds such as directly via the company bank account. This ensures that all company transactions are kept in one place and can be easily tracked.

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Can I expense Charitable Donations? Guide

Can I expense Charitable Donations?

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Self employed advisory fuel rates guide Guide

Self employed advisory fuel rates guide

Advisory fuel rates are recommended repayment amounts a company can use when reclaiming the fuel element on business mileage.

The rates are used to calculate:

  • How much employers should reimburse employees for business travel using the company car
  • How much employees need to repay employers for private travel using the company car
  • The VAT you can claim back on business mileage using your personal vehicle
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Can I expense Office rental? Guide

Can I expense Office rental?

Yes, you can claim office rental and the costs of using a coworking space as a deductible business expense.

For further information on allowable business expenses, refer to our expenses and allowances guides for limited company directors and the self-employed.

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Can I expense Software? Guide

Can I expense Software?

You can claim the costs of purchasing computer software that your business uses for less than two years. You can also claim for computer software that you use for more than two years, if your company makes payments regularly to renew the license.

For further information on allowable business expenses, refer to our expenses and allowances guides for limited company directors and the self-employed.

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Can I expense Travel & subsistence? Guide

Can I expense Travel & subsistence?

You can claim travel-related expenses, as long as the travel is wholly and exclusively for business purposes and isn't considered 'ordinary commuting'. HMRC defines a commute as a trip that you make between your home and a permanent workplace.

You can claim for:

  • costs associated with running a car or vehicle, such as fuel expenses, parking fees and tolls.
  • transport fares for flights, as well as rides taken via train, bus, taxi and ferries
  • meals and accommodation for overnight business trips

You can claim "reasonable" food and drink expenses if:

  • You're making an occasional business trip outside of your normal pattern of travel
  • You're staying overnight, and are also claiming accommodation costs
  • Your trade is, by nature itinerant

For further information on allowable business expenses, refer to our expenses and allowances guides for limited company directors and the self-employed.

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Can I expense Utilities? Guide

Can I expense Utilities?

If you're renting an office, you can claim utilities as a deductible expense.

If you're using your home as an office, you'll need to work out the proportion of your utilities that you can allocate to business use in order to claim these costs as a deductible expense.

For further information on allowable business expenses, refer to our expenses and allowances guides for limited company directors and the self-employed.

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Can I expense Repairs to equipment? Guide

Can I expense Repairs to equipment?

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Can I expense Pensions? Guide

Can I expense Pensions?

As a sole trader, you can't claim pension contributions as a deductible expense. However, you can get personal tax relief from contributions you make into your pension scheme.

If you're a limited company director, you have the option of making pension contributions through your company. This will reduce your company's profits, and as such reduce the amount of corporation tax your company pays.

For further information on allowable business expenses, refer to our expenses and allowances guides for limited company directors and the self-employed.

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