A tradesman's guide to business expenses
Are you claiming for all of your business expenses that you're entitled to? Learn what your tax benefits are and reduce your downtime as a business below.
A tradesman's guide to business expenses
For tradesmen, such as those operating as a "man with a van," understanding and managing your business expenses can be hard. Business expenses can range from fuel costs to vehicle maintenance and insurance. But one overlooked expense is breakdown cover. RAC Business Breakdown Cover offers peace of mind with your finances and any unexpected vehicle problems. Meaning that you do not have any costly downtime or missed opportunities.
Understanding business expenses
Business expenses
Business expenses are costs caused by the running of a business. These expenses are essential for the operation, management, and sustainability of the business. Examples include:
- Vehicle expenses (fuel, maintenance, insurance, breakdown cover)
- Rent for business premises
- Salaries and wages for employees
- Equipment and supplies
- Advertising and marketing costs
- Utilities (electricity, water, internet)
These expenses are part of the daily operations of a business and are necessary for generating income.
How they affect your tax return
Business expenses directly impact your tax calculation. They can be deducted from your gross income to determine your net income. This makes your overall taxable income lower. You need to accurately track and report these expenses. You should keep your records and receipts to showcase your expenses. By managing and documenting your business expenses, you can make sure that you are compliant with tax regulations and maintain your financial performance.
Self-employed allowable car, van and travel business expenses
What you can claim
For the self-employed, various vehicle and travel expenses can be claimed as business expenses. These include:
- Fuel costs for business journeys
- Repairs and servicing of the vehicle (Have you tried an RAC Mobile Mechanic yet?)
- Insurance for business vehicles
- Breakdown cover, which is particularly relevant for ensuring minimal disruption in business operations
- Vehicle tax
- Vehicle leasing or hire charges
- Parking fees incurred during business activities
- Hotel stays and meals during business trips
- Train, bus, airfare, and taxi fares for business travel
These expenses are part of the daily operations of a business and are necessary for generating income.
What you cannot claim
Common misunderstandings about business expenses often lead to incorrect claims. It's important to note that:
- Personal travel expenses or commuting costs are not claimable.
- Fines, such as parking or speeding tickets, incurred during business operations cannot be claimed.
- Costs related to non-business use of a vehicle or travel cannot be included in business expense claims.
- Entertainment expenses, even if incurred during a business trip, are generally not allowable.
Understanding the difference between allowable and non-allowable expenses is critical for accurate tax filing and compliance.
RAC Business Breakdown Cover
Having an RAC Business Breakdown Cover can be used as a business expense. Meaning that you can have vehicle safety and financial efficiency. During the event of a breakdown, you will get immediate assistance making sure that you have minimal downtime and lost business. It also safeguards you for any repair costs, an essential for businesses that rely on their vehicle.
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Knowing how to correctly claim your business expenses is important for tradesmen. Properly reporting your vehicle and travel costs can lead to tax savings. RAC Business Breakcover also works as a taxable expense. Alongside offering peace of mind, it can reduce your financial burdens and keep your vehicle running smoothly.
Ready to be business efficient? Get your Breakdown Cover today.
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Tax FAQs
Self-employed individuals can claim various vehicle and travel expenses including vehicle insurance, repairs, fuel, parking, hire charges, vehicle license fees, breakdown cover, and fares for business travel. However, non-business driving or travel costs, fines, and travel between home and work are not claimable.
You can use a flat rate per mile for calculating vehicle expenses. This simplifies the process as you don’t need to account for the actual costs of buying and running your vehicle. We have a useful article that includes the rates for different vehicles which you can apply to the first 10,000 miles and a reduced rate beyond that.
Yes, you can claim capital allowances on cars used in your business. This means you can deduct a part of the vehicle's value from your profits before paying tax. The type of allowance you can claim depends on the car's CO2 emissions and the date of purchase.
RAC Business Breakdown Cover can be claimed as a tax-deductible expense, which can reduce your overall taxable income. This makes it a financially efficient option for sole traders seeking to optimize their tax positions.