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Benefits and Taxes for Directors
Company expenses you can claim as a Director
As a director of a company, it's important to understand the expenses that you can claim to minimise your tax liabilities. Here are seven expenses that you should consider when running a SME business.
- Trivial Benefits
Trivial benefits are a type of tax-free benefit that you can claim including things like a small gift, a meal out, or a bottle of wine. The value of each benefit must be £50 or less, and you can offer up to £300 worth of trivial benefits per individual per tax year.
- Eye Tests and Lenses
Eye tests and lenses are another common benefit offered by employers, and as a Director, you can take advantage of these too. You can take care of your vision and ensure you have the correct prescription for your glasses or contact lenses.
- Health Check
This can include a range of tests, such as blood pressure, cholesterol, and blood sugar levels to ensure you can stay on top of your health and identify any potential health issues early on.
- Use of Home Working
More people are working from home than ever before and ensuring you're able to do this in a comfortable environment is crucial. You can claim tax relief if you have to work from home, or if your business does not have an office. HMRC has approved allowances to support this of £6 per week or £312 per tax year or claim.
If you use part of your home for business, you can claim expenses related to that usage. These are known as "allowable expenses" and must be clearly separated from private usage. Costs will be apportioned by the area used in the house.
You can also claim for any equipment such as a desk, chair, and printer, as well as the cost of your internet and phone bills.
- Annual event or party
Your limited company can deduct the cost of its annual or festive party as a business expense. As long as you invite all your employees to attend, the whole event will not be subject to tax, even if you are just a one-man band company.
Rate of claim and spouse tax exemption:
You have £150 (including VAT) to spend per head on an office party. For a director, this can include partners or spouses, as well as employees.
An exemption, not an allowance:
The £150 spend is an exemption, not an allowance. You will have to actually spend the money in order to make a claim on tax. If it is not used, the exemption will be lost. So if you’re a one-man company, but do not want to go for a festive dinner by yourself, you cannot make a claim for £150 in cash or cash substitute such as shopping vouchers.
Overspending:
If you overspend by even just £10, you will no longer be able to claim the tax exemption on the £150. The overall cost of all events must not exceed £150.00 per head. If it does, the entire cost will be treated as a benefit-in-kind (BIK) and be subject to additional tax and National Insurance.
- Travel Expenses
One of the main components of your expenses list as a Director is travel expenses. HMRC guidelines state that you can only claim travelling-type costs as tax-deductible expenses when visiting a temporary workplace. 24 months is the rule of thumb used to classify a workplace as temporary.
As part of your day-to-day work, you will incur travel expenses when you visit your primary worksite or even different client sites. You may also incur business travel costs when you travel to other locations for business reasons. Such costs could include when you go to interviews or visit the bank or accountant. Extra travel costs could also be when you attend training courses and seminars or travel to buy company supplies.
- Training and professional development
Expenses related to attending industry conferences, skill development, and training courses that align with your business practices.
To find out more about how we can support you, contact our team through our website https://www.iexcelaccountants.co.uk/contact.html.
