Which business expenses are tax-deductible in the UK?

small business accounting

In a small business accounting environment, two things hold major accountability: income and expenses. While there’s a bound taxation scheme for incomes, there are expenses where businesses in the UK need to oblige the tax rules. 

What is a business expense?

When simply put, business expenses are an outflow of resources that are put out in order to enable the day-to-day stable functioning of the business environment. Every expense that allows that supports business operations is a business expense. 

Does that mean the party thrown for employees and a yacht bought can be put under “business entertainment” cost?  

Business expense

Business expenses are directly deducted from the business’s profits. But, do all of them stand deductible? 

Expenses like Lighting, heating, bank charges, stock, freelance fees, Business travel costs, stationery, raw materials cost, advertising and marketing cost, and rent can be directly deducted from the profits. 

Expenses that stand deductible in special cases

Childcare expenses

There is no such childcare expense in a normal day-to-day running of a business environment that can fall under the business expense category. However, when paid through special childcare vouchers to a threshold of 243 Euros, a limited company can ascertain tax relief. 

Home office

As a result of covid 19 lockdown, many have shifted to home offices. But are all expenses tax deductible? The work from home protocol doesn’t make the home your office. However, certain costs for you and the business employees can fall under business expense. 

In case your home is the office, certain utility bills can come under the business expense.

Expenses that do not stand deductible

Client’s entertainment

Throwing parties and treats for clients cannot count as a business expense under any circumstance.

When you are entertaining your employees to reward them for their hard work and dedication, that can stand deductible at some point. 

Gifts for clients

HMRC considers gift expenses for clients as an entertainment one. And thus, anything above 50 Euros wouldn’t join the clan. 

Also, the 50 Euros threshold can be claimed when it holds your logo or other advertising copy.  


If you went over the permissible speed to appear for a client meeting on time, the fine you paid would not be a business expense to be deductible from the profit. Also, your office parking fines and others belong to the same clan.

Other such expenses include non-gift aid charitable donations and unacceptable business travel costs such as staying three days extra without purpose.

When in doubt, speak to the expert and get an entailed detail about expenses that can reduce your tax by lowering the profit margin. FinBridge is a team of expert accountants that help corporate accounting for small businesses thrive through best-grade accounting services.

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