According to statistics, the number of businesses going under is up by 52%. As businesses are faced with more challenges than ever, one way you can ease the pressure is by reducing your tax bill. You can do this by maximising your business tax deductions. By claiming all the eligible expenses you can, you reduce your taxable income and ultimately pay less tax. Whether you're a sole trader or running a limited company, understanding what you can deduct is essential to keeping more money in your business.

What Counts as a Deductible Business Expense?

Tax deductions are business expenses that you can subtract from your total income before calculating how much tax you owe. To qualify, the expense must be "wholly and exclusively" for business purposes. This means anything that is personal or not directly related to your business can't be claimed.

Some common deductible expenses include office supplies, staff salaries, travel costs and certain equipment purchases. There are also special deductions for specific industries, like R&D credits for tech companies or allowances for construction businesses. Keeping up to date on which expenses qualify can make a big difference.

Common Deductions Every Business Owner Should Know About

Here are some of the most common deductions that apply to most businesses:

This includes things like computers, printers, and stationery that are used for business purposes.

If you pay staff, you can claim their wages, pensions and National Insurance contributions.

Business-related travel, including transport, accommodation, and meals are deductible. You can also claim for business use of your car, either through mileage rates or actual vehicle expenses like fuel and maintenance.

- Depreciation: For bigger purchases like machinery or vehicles, you can spread the cost over time through depreciation, claiming a portion of the cost each year.

Knowing what you can deduct is vital to saving money and lowering your tax bill. But it’s important to make sure each expense is legitimate and meets HMRC’s rules.

Industry-specific Deductions

Some industries have specific deductions that other businesses might not be able to claim. For example, creative businesses may be able to deduct the cost of cameras and editing software, while agriculture businesses may get tax relief for equipment and improvements to land.

Understanding the deductions that apply to your industry can be tricky. A good way to get ahead is by consulting a tax accountant to make sure you’re not missing anything.

Keeping Good Records to Support your Deductions

It’s essential to keep accurate records of all your expenses and income. HMRC requires businesses to show detailed records in case they want to check your deductions. This means keeping receipts, invoices and bank statements organised.

Good accounting software can help you track your expenses and stay on top of things, while apps can help you manage receipts on the go. This will save you time and reduce the risk of errors when you file your tax return.

Final Thoughts

Maximising your business deductions is one of the easiest ways to reduce your tax burden and improve your business’s cash flow. By understanding what expenses are deductible, keeping organised records and consulting a tax professional when needed, you can save a significant amount on your taxes. Whether you’re just starting or looking to improve your tax strategy, it’s worth taking the time to get your deductions right.