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Tax Deductible Expenses

There is often some misunderstanding about which items of business expenditure are deductible against profits for tax purposes, and which are not. The following list covers the items most commonly requiring explanation. The list is written in general terms, so specific advice should always be taken.

Item Deductible Against Profits Not Deductible
Normal business expenses generally
Expenditure incurred wholly and exclusively in the course of business
Personal expenditure and all entertaining except staff
Capital items (i.e. items expected to be used for more than 2 years)
An annual capital allowance is available on most items of equipment
Freeholds and long leaseholds of most non-industrial premises
Computer software
If bought separately from hardware
Otherwise, capital allowances available
Gifts to customers
Gifts costing up to £50 and bearing the business name
Any item of food, drink or tobacco
Home expenses
Reasonable proportion of home running expenses, depending on he extent of use of home for business
Domestic expenses not related to the business
Telephone bills
Business proportion based on calls
Private element and home line rental
Motor expenses
Business proportion based on mileage
Private element
Travel expenses
Business travel
Travel between home and normal place of business
Subscriptions
Professional subscriptions, relevant magazines and journals
No-business related subscriptions
Wages and salaries
Staff (including family where duties genuinely carried out)
Proprietor’s own drawings and gratuitous wages to family
Bank charges and interest
Charges on business accounts and business related loans
Interest for personal overdrafts and loans
Other interest
Interest on business loans
Interest on income tax paid late and interest paid to proprietors
Insurance
Business related policies
Life assurance, self-employed NI, health and sickness insurance
Bad debts
Specific bad debts from business transactions
General provisions and debts written off voluntarily
Accountancy fees
Normal business related fees
Costs of unsuccessfully defending an HM Revenue & Custom investigation
Legal fees
Most business related advice
Partnership agreements, company formation, property acquisition and renewing long leases
Personal expenditure
Modest subsistence expenses in certain cases when working away
Lunches, private expenses and bills, gifts, clothing (unless a uniform)
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