The one rule behind all of it
One test decides whether a cost counts: was it spent purely to run the business? If yes, you can usually take it off before working out your tax. If it was partly personal, or nothing to do with the business, you can't.
You don't pay Corporation Tax on everything your company earns. You pay it on your profit. Profit is your income minus your genuine business costs. So every real cost you claim is money you don't pay tax on.
What can I usually claim?
Here are the everyday running costs almost every small company can take off:
- Stock and materials, the things you buy to sell, or to make what you sell.
- Staff wages, salaries, and the employer National Insurance and pension you pay on top.
- Premises, rent, heating, lighting, business rates for a place you run the business from, like an office, shop or unit. If you work from home, you don't put your personal rent or household bills through the company. There are special home-working rules for that, like a set £6 a week the company can pay you, and we sort that bit for you.
- Insurance and bank charges, business insurance, your business account fees.
- Software and subscriptions, the tools you pay for to do the work.
- Marketing, your website, advertising, the cost of getting customers.
- Travel for work, train fares, parking, and the cost of driving for the business (not your normal commute to a regular workplace). If you drive your own car for work, you claim a set rate for each business mile, not your petrol: 55p a mile for the first 10,000 business miles in a year, then 25p a mile after that. Putting your personal petrol straight through the company causes a tax bill you don't want, so we use the right method for you. (Petrol counts directly only for a car the company itself owns.)
- Professional fees, your accountant, solicitor, or other business advisers.
- Training, courses that help with the work your business already does, whether they keep your skills fresh or teach you something new for the same line of work. (Training to start a completely different kind of business is the one to check with us first.)
If you paid for it purely to run the business and you've kept a record of it, it counts.
What's treated differently (the bits people get wrong)
A few things look like normal costs but follow their own rules. Two of them catch most people out.
Equipment you keep and use (laptops, tools, a van)
When you buy something you'll keep and use for a long time, like a laptop, machinery, tools or a van, that's not an everyday running cost. It's called a capital cost, and it gets its own kind of relief instead. Most of these still come straight off your profit, often the whole amount in the year you buy them, up to a yearly limit of £1 million. So for almost every small company, buying equipment cuts your tax the same way a normal cost would. It goes in a different box. (Cars are the main exception and follow separate rules.)
You buy a £1,200 laptop for the business this year. Even though you'll use it for years, the full £1,200 comes off your profit now, so it lowers your tax bill just like rent or wages would.
You might also see the word "depreciation", which means spreading an asset's cost over the years in your accounts. For tax, we add that figure back and use the capital relief above instead. We handle that swap for you.
Entertaining clients
Your company can pay to take a client or customer out for lunch, drinks or an event. It's a real business cost. The catch is that it doesn't cut your Corporation Tax: we add it back when we work out the tax, so it never lowers the bill. The company spends the money, but the tax stays the same. People often expect this one to save tax, and it doesn't. (Entertaining your own staff, like a team Christmas do, can work differently.)
You spend £300 taking a client to dinner. The company can pay it, but the £300 is added back when we work out your tax, so it doesn't lower your Corporation Tax bill.
Anything part-personal
If a cost was partly for the business and partly personal, say a phone you use for both, you can only claim the business share, and only if you can work out what that share is. A cost that's all personal can't go in at all.
What about paying myself?
If your company pays you a salary through payroll, that salary is a business cost. It comes off the company's profit like any other wage. (The company has to pay it for real, not only write it down on paper. There's a time limit for that, and we handle it.) Dividends are different: they're paid out of profit after tax, so they don't reduce your Corporation Tax. The right mix of salary and dividends depends on your own situation, and for a complicated setup an accountant may be the better fit.
Do I have to keep receipts?
Yes. Keep a record of what you spent and what it was for, and hang onto it for six years from the end of the accounting period it falls in (not six years from the day you bought it). You need to be able to show a cost was real if HMRC ever asks.
How SimpleReturns handles it
Connect your bank or upload a statement, and we add up your allowable business costs, apply the special rules for equipment, depreciation and entertaining, and show you the total to check. You only pay tax on what's left, and you never have to work out which box anything goes in.