How We Helped a Home Business Owner Save £1,400 a Year by Claiming Overlooked Expenses
The client
Nadia runs a small business selling handmade jewellery online and at fairs.
Like many small business owners, Nadia kept her overheads relatively low and carried out much of the work herself, including running the business from home and travelling to fairs to sell her jewellery.
When we reviewed her accounts and tax position, we noticed that several legitimate business costs weren't being claimed.
The problem
Nadia was paying more tax than necessary because her accounts weren't capturing all of the costs associated with running her business. In particular, we identified three areas that had been overlooked.
Use of home: Nadia regularly worked from home but wasn't claiming an appropriate amount for the business use of her home.
Business mileage: she was using her personal vehicle to travel to fairs and on other qualifying business journeys without claiming the associated mileage.
Mobile phone costs: Nadia regularly used her personal mobile phone for business calls but wasn't claiming the appropriate business proportion of the cost.
Individually, these costs might not appear significant. Over the course of a year, however, they added up.
What we changed
We reviewed how Nadia operated the business and identified the expenses that could legitimately be claimed.
Working from home: because Nadia regularly operated her business from home, we introduced an appropriate use-of-home expense based on her circumstances.
Business mileage: we helped Nadia identify qualifying business journeys and put a process in place to record and claim eligible business mileage going forward. This meant business travel using her personal vehicle was properly reflected in the accounts rather than being paid entirely from her own pocket.
Personal mobile phone: Nadia was also using her personal mobile phone for business purposes. We therefore introduced a claim for the appropriate business proportion of her mobile phone costs, rather than leaving the entire cost as a personal expense.
The result
None of the changes involved complicated restructuring or aggressive tax planning. We simply made sure Nadia was claiming the legitimate costs associated with running her business.
Together, the additional allowable expenses resulted in an estimated annual tax saving of £1,400. More importantly, we put processes in place to ensure these expenses wouldn't continue to be overlooked in future years.
The bigger lesson
Tax planning isn't always about complicated company structures or large transactions. For many small business owners, one of the simplest ways to improve tax efficiency is to make sure all legitimate business expenses are being captured in the first place.
Working from home, business travel, telephone costs, software, professional subscriptions and other everyday expenses can easily be overlooked. Small amounts can add up to a meaningful tax saving over the course of a year.
Are you claiming everything you're entitled to?
Our Tax Health Check reviews how your business operates and the expenses you're currently claiming to identify areas that may have been overlooked.
If you're paying business costs personally or aren't sure which expenses you can claim, it may be worth reviewing your current setup.