Limited Company Expenses Guide

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Limited Company Expenses Guide

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5 invoice template tools to help you invoice when self employed

An invoicing problem is a good problem to have.

It means that you have too many clients or too much work to properly charge for it. The good news is that it's an easy problem to fix.

Invoicing is essential for any self-employed person individual. It's how you collect revenue, and, done correctly, it's also how you can avoid tax issues.

I know how important this is because I've been there as a small business owner - and I searched for a long time to solve this problem and make it painless.

Besides hiring a personal assistant or part-time accountant (which is impractical for most smaller-time, one-person-show contractors), there's the option of using invoicing software that makes the process easy.

Below, I break down the difference between five popular invoicing tools to help you get started on making a decision.

Your decision will ultimately depend on what your business really looks like.

These are some questions you can ask yourself:

  • Do you only have a handful of regular clients?
  • How do your clients prefer to pay you in a certain way?
  • Are late payments a recurring problem for you?
  • Do you send out invoices, or does somebody else?
  • Do you already have accounting software in place, or are subscribed to an accounting package that includes the use of an accounting software?
  • What other applications and tools do you use for your business?
zoho invoicing tool
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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 Computer consumables?

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Can I expense Charitable Donations?

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Can I expense Insurance?

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Do I have to pay tax on expenses?

You do not need to pay tax on allowable business expenses. These are essential business costs that are incurred "wholly and exclusively" for the purposes of running the business. They can be deducted against your income, thereby reducing the amount of tax that you need to pay.

For further information on the types of expenses you can claim, refer to our guides for sole traders and limited company directors.

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Can I expense a Bicycle or use the Cycle to Work scheme?

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Can I expense Hire and rental charges?

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Can I expense Parties (or staff entertainment)?

As a limited company director, you can can claim for the costs of hosting a staff party, as long as the following conditions apply:

  • Your cost per pax shouldn't exceed £150 (including VAT). Your employees may invite a partner, and if they do, your total budget for an employee and an additional guest will be £300.
  • The main purpose of the event is to entertain your staff members. As such, most of the event attendees should be your employees.

Do note that the per pax budget of £150 applies across the year, so you can claim for several staff events as long as the costs fall within the budget. You can claim this expense even if you're the sole employee in your business.

As a sole trader, you're not considered an employee. As such, you can't claim the costs unless you have employees.

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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Why should I claim mileage?

As a contractor, freelancer or small business owner, it's important that you make the most of what you can claim-especially as the trips you make can add up over time. Here's an example: if you make a 25-mile round trip twice a week, it adds up to 2,400 miles a year. That's £1,080 that you can as deduction against your business revenue.

To learn more, read our guide on how to claim business mileage.

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Can I expense Airfares (plane tickets) and air travel?

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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 expense Paypal charges?

You can claim PayPal charges 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 Late tax payment penalties?

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How do I find an accountant?

In today's times, you can find an accountant pretty much anywhere you go whether that's walking down the high street or browsing the internet. Take a look at our guide on choosing an accountant to get some tips on what to look out for when choosing an accountant.

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Can I expense Computer purchases?

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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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Can I expense Employer's liability insurance?

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Can I expense Professional fees?

The costs incurred for engaging professional services-such as hiring an accountant, lawyer or architect-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 Printing?

Printing costs can be claimed 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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