Business Expenses: Sole Trader Vs Limited Company |
What expenses can each claim? |
POSTED BY HELEN BEAUMONT ON 23/02/2018 @ 8:00AM
Are you confused about what business expenses you can claim as a sole trader vs a limited company? Don't worry, you are not alone; many people that I speak to ask the same question ...
If you're confused about what business expenses can be claimed, don't worry, you're not alone!
copyright: sifotography / 123rf stock photo
HMRC are big on disputing expenses and have tweaked and changed the rules over the years. There's a difference between what a sole trader can claim compared with that of a limited company.
When it comes to mobile phones, the sole trader needs to declare how much is for business and how much for personal use and can only claim back the business part. For a limited company, as long as the phone is in the business name, a full 100% can be claimed.
A capital allowance can be claimed on purchase of a new computer. For the sole trader, an add-back of allowances will apply if there is private use. Providing the company needs a computer, one can be bought through the company tax-free.
For the self-employed sole trader, there are no tax-free benefits and incentives. There are a number of tax-free benefits and incentives for limited companies.
A sole trader working from home can claim a deduction for mortgage interest/rent, council tax and light and heat, based on the number of rooms in the property being used by the business. A limited company director working from home can claim £4 per week without receipts for home expenses.
A sole trader can claim the actual cost of running his car for business. A director of a limited company is restricted to claiming 45p per mile for the first 10,000 miles and 25p thereafter (assuming they own the car personally). Due to the benefit in kind rules, it may not be efficient to provide the director with a company car.
A sole trader can't claim for training costs where they are learning a new skill, they can, however, claim for costs of updating a skill. Limited companies can provide its directors and staff with training as long as it is for the benefit of the company.
Deciding on the model you want to set up for your business will depend on these, and a number of other factors. It is worth speaking to an experienced tax advisor such as myself, and also to your accountant, both of us will give you great advice.
"Would you like to know more?"
The above provides a snapshot of some of the business expenses you can and cannot claim. If you'd like to find out more, then do call me on 01908 774323 or click here to ping me an email and let's see how I can help you.
Until next time ...
HELEN BEAUMONT
Join my mailing list! Click here and be one of the first to know when I publish a new blog post!
Leave a comment ... |
More about Helen Beaumont ... | ||
|