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.
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Download our Ultimate Expenses Guide
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Can I expense general travel expenses?
General travel expenses can't be claimed as a deductible business expense. You can only claim for travel-related expenses as long as the trip is made wholly and exclusively for business purposes, and isn't considered 'ordinary commuting'.
Can I expense mobile phone?
As a sole trader, you can't claim for the line rental if you're using your mobile phone for business and personal use. You can claim the costs of business calls, if these are indicated on an itemised bill. To claim for the costs, you'll need to set up a mobile contract under your business name, and use it solely for business purposes.
As a limited company director, you'll need to set up a contract between your company and service provider in order to claim the full costs as a deductible business expense. If the contract is made under your personal name, you won't be able to claim the costs as an expense.
Refer to our guide on mobile phone expenses for further information.
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
Can I expense Phone calls?
As a sole trader:
If you're using your mobile phone line for both business and personal use, you can't claim for line rental. However, you can claim for call costs for business use if you obtain an itemised bill. If you have a separate mobile phone line for business use, you can claim the costs incurred.
As a limited company director:
1. Mobile phone: If your mobile phone contract is between your company and mobile phone provider, and is used for solely business purposes, you can claim the entire bill as an allowable expense.
If you have a personal contract, you can claim for the costs incurred for business calls. You're also able to reclaim the VAT element of the business calls.
2. Landline: If your landline contract is solely for business use, you can claim the cost as an allowable expense. You can also claim for business calls you've made using your home phone line.
Limited company expenses & tax allowances guide
As a limited company director, you want to run your business in the most tax efficient way possible.
One way to achieve this is to claim for allowable business expenses correctly, so that you don't wind up having to pay more tax than you are legally obliged to.
It can be tricky figuring out what you can or cannot claim for, and this is where our guide comes into play.
We'll run through the different expenses you can claim for, but bear in mind that this isn't a definitive guide. Do check out our resource hub on limited company tax topics for more information, or consult our specialist accountants at Forma if you need personalised advice.
Can I claim using the cycle to work scheme?
Employers who purchase bicycles and safety equipment for loan to employees can benefit from treating the purchase as capital expenditure eligible for corporation tax relief. VAT can also be claimed back on the purchase unless you are registered on the VAT flat rate scheme.
The loan of bicycles and safety equipment under the cycle to work scheme removes any tax charge to the employee that would usually arise on a taxable benefit.
Why are expenses important?
Expenses are important as you can claim them against your revenue, which helps to reduce the amount of tax you need to pay.
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.
How to claim for business mileage
Being self-employed often means having to juggle multiple roles and tasks.
Amidst all your different responsibilities, keeping track of your business mileage can appear tedious-and it can easily become a task that you postpone time and time again. Yet, these little trips can add up, and as a small business owner, it's important that you make the most of what you can claim.
If you're newly self-employed, or just want to get a grasp on the basics of claiming your business mileage, this article is for you.
It explains the essentials, including how you can calculate your costs, the records you need to keep, and other important information that you need to be aware of.
Both business owners and employees can claim business mileage.
What is a use of home allowance?
As a self-employed person, there are two ways to calculating the allowance you can claim for working from home. You can claim a fixed rate of £6 per week, or a proportion of household costs used by the business. Further information is available on our resource on the use of home allowance.
Can I expense Marketing costs?
You can reclaim marketing expenses as long as these are used solely for business purposes. This applies to both one-off costs and ongoing fees.
How do I make pension contributions through a Limited Company?
As a limited company director, you can make pension contributions as an individual (as an employee), as well as through your company (as an employer).
Most directors make pension contributions from their company. This is a tax efficient approach, as employer pension contributions are an allowable business expense, which means that your company doesn't need to pay corporation tax on pension contributions made.
You won't need to pay tax on your contributions, as long as it falls below your annual allowance (capped at £40,000 for 2020/21), and your pension benefits doesn't exceed the lifetime allowance (£1,073,100 for 2020/21).