Claiming allowable expenses when calculating taxable profit as a self-employed business owner is an important step in preparing your tax return.

It will ensure you are not paying more tax than you need to and help mitigate some of the costs of running your business.

If you work from an office or use one in the course of your business activities, there may be more scope for claiming allowable expenses than you think.

Office-based expenses

For some items, you can claim allowable expenses straight away, including items you would normally use for less than two years, or bills that normally cover a period of less than two years, such as:

• Rent and utilities
• Business rates
• Property insurance
• Stationery
• Phone and internet bills
• Postage
• Printing

For other expenses, what you can claim depends on the type of accounting you use.

If you use cash basis accounting, you can claim items such as computers, long-term software or repairs to your business premises as allowable expenses.

However, if you use traditional accounting, you should claim capital allowances for these longer-term items. This is usually applicable to sole traders or partnerships earning over £150,000 per year.

Home offices

You may be able to claim for a portion of costs such as heating, electricity or rent if you use part of your home for your business – although you will need a reasonable method of working this out.

For example, if you have six rooms in your house and use one as an office five days per week, you may be able to claim for a portion of the electricity costs.

With an electricity bill of £600 per year, you can claim £100 as reasonable expenses (assuming all rooms in your home use equal amounts of electricity). You work there five days per week out of seven, so you can claim £71.45 as expenses.

This will help to reduce the cost to you and your family of using your home for business.

Make sure you claim all expenses applicable to your office to ensure that you optimise your tax position and draw as much financial benefit from your business as possible.

For advice on claiming allowable expenses for office costs, please contact our team.

Directors have the ability to draw income from a business in several ways, including through the extraction of profits from the business, which can create significant opportunities to manage tax liabilities.

Key tax rates and allowances for 2025/26

Here is what directors in England, Wales, and Northern Ireland need to keep in mind for the new tax year starting 6 April 2025:

• Personal Allowance: Stays frozen at £12,570 until April 2028.
• Dividend Allowance: Remains at £500, so anything above this will be taxed.
• Basic Rate Threshold: Frozen at £50,270.
• Additional Rate Threshold: Frozen at £125,140.

These frozen thresholds require you to plan strategically to make the most of your allowances and minimise tax liabilities.

Why you should consider combining salary and dividends

A combination of a small salary and dividends can be one of the most tax-efficient ways for directors to draw income, reducing tax and National Insurance liabilities.

A salary lowers your company’s taxable profits, while dividends are not liable for National Insurance Contributions (NICs), making them cost-effective.

Paying a salary above the NIC threshold also ensures your contributions count towards the state pension, helping with long-term financial planning.

However, one important thing to remember is that dividends can only be paid if your company is profitable. If the company has a poor year, you may be limited to drawing just a salary, which could impact your financial stability.

How to structure your income for 2025/26

The two most common approaches for directors, depending on whether you qualify for the National Insurance Employment Allowance (NIEA), are as follows:

Option 1

If you are the only employee in your company, you likely will not qualify for the NIEA, which covers employer NICs for eligible businesses. In this case, keeping your salary low can be more tax-efficient.

• Salary: £5,000 per year
• Dividends: Up to £45,270 without exceeding the basic tax rate band.

The first £7,570 of dividends (after your £5,000 salary) is covered by your personal allowance and an additional £500 of dividends falls under the dividend allowance.

The remaining £37,200 is taxed at 8.75 per cent, resulting in a total tax bill of £3,255.

Option 2:

If your business has additional employees, such as a family member helping out, you may qualify for the NIEA, which increases to £10,500 from April 2025.

This allows you to pay yourself a higher salary while still being tax-efficient.

• Salary: £12,570 per year
• Dividends: Up to £37,700, staying within the basic rate band.

This can be a favourable option as the tax on dividends remains the same as in option 1, and because by paying a higher salary, you will reduce your company’s Corporation Tax liability.

At a 25 per cent Corporation Tax rate, the additional salary could result in tax savings of around £1,800 or more.

Choosing the best option

The best approach depends on your company’s setup and your financial goals, as there is no one-size-fits-all solution.

A lower salary typically suits sole directors who want to keep things simple, while a higher salary benefits those eligible for the NIEA by offering additional corporation tax savings.

Speak with our expert accountants to review your circumstances and tailor a strategy that works best for you.

If you are a sole trader or small business owner using a double cab pickup (DCPU) for your work, now is the time to consider your options.

The Budget revealed a tax change for DCPUs that could have significant financial implications for both you and your business.

Whether you are looking to expand your fleet or replace an ageing vehicle, acting now could save you money.

What is a DCPU?

A DCPU is a type of vehicle that features a front passenger cab with a second row of seats for up to four passengers, four independently opening doors, a payload capacity of one tonne or more, and an uncovered pickup area behind the cab.

These vehicles are typically popular among landscapers, builders, and other tradespeople due to their versatility and practicality.

What is changing?

Today, DCPUs benefit from the favourable tax treatment typically applied to commercial vehicles.

This includes lower Benefit-in-Kind (BIK) charges for personal use, making them a cost-effective option for employees.

Additionally, businesses can take advantage of generous capital allowances, which allow them to claim up to 100 per cent of the vehicle’s purchase cost in the first year.

However, from 1 April 2025 for Corporation Tax and 6 April 2025 for Income Tax, all DCPUs will be treated as cars for tax purposes, including capital allowances, BIK, and certain deductions from business profits.

This change will have significant financial impacts, including:

• Employees using a DCPU for personal mileage will receive higher company car tax bills. A pickup that currently costs a higher-rate taxpayer around £1,800 per year in BIK could jump to over £10,000, depending on the vehicle’s CO2 emissions and list price.
• Businesses will no longer be able to write off the full cost of a DCPU in the year of purchase. Instead, these vehicles will be subject to capital allowance rates as low as six per cent per year, drastically reducing upfront tax relief.

If you purchase or lease a DCPU before April 2025, you will still be able to lock in and benefit from the current tax rules until at least 2029.

Planning your next move

So, the answer to our original question is yes. If you do not want to face the increased financial liabilities, purchasing or leasing your DCPU before April 2025 is the smart move.

Here is what you should consider:

Firstly, you should review whether any of your current vehicles need replacing or if expanding your fleet could make financial sense under the current tax regime.

Think carefully about whether it will be more financially beneficial to purchase the vehicle outright or lease one.

If you do decide to lease, try to avoid contracts extending beyond April 2029, as the new rules will eventually apply.

To minimise BIK charges, ensure any DCPU is strictly limited to work use.

For cars, the definition of private use is stricter, requiring robust controls like vehicle storage and insurance exclusions, which may not be practical for many businesses.

Want to know how buying or leasing a DCPU could affect your tax bill? Get in touch today!

With Christmas right around the corner, many of you might be looking into ways to spread the holiday cheer among your employees.

Maybe you want to give a box of chocolates to your executive assistant or a bottle of wine to your line managers – small gestures that brighten up the workplace.

Unfortunately, it is not as straightforward as simply heading to the shops and picking up presents for your team as these thoughtful gestures can have implications for your tax and National Insurance Contributions (NICs).

However, this does not mean you should shy away from offering such gifts.

If made correctly, they can remain tax-efficient while significantly boosting morale and fostering a positive workplace culture.

What are trivial benefits in kind?

Trivial benefits are small, non-cash gifts or perks given to employees.

For them to qualify as “trivial” in the eyes of HMRC, they must meet specific criteria:

• Each gift must cost £50 or less.
• The benefit cannot be cash or a cash equivalent (like gift cards exchangeable for cash).
• It must not be a reward for work or performance.
• The gift must not be part of an employee’s contractual benefits and cannot replace salary or bonuses.

Examples of trivial benefits include flowers, a theatre outing, or small seasonal gifts like hampers or wine.

Tax liabilities of trivial gifting

One of the most significant advantages of trivial benefits is their tax efficiency.

If these gifts meet the conditions set by HMRC, they are completely exempt from tax and NICs.

You will also not be required to report these qualifying gifts to HMRC, meaning there is no need to file a P11D form.

However, if a gift or benefit does not meet the criteria for trivial benefits, you must declare it to HMRC via the P11D process and pay any tax or NICs owed. If you are paying tax on employee benefits through your payroll, filing P11D forms is not required. However, you will still need to submit a P11D(b) to pay any Class 1A NICs due.

How to account for trivial benefits in your business

To maintain compliance, it is important to keep track of your trivial benefits.

You should document the details of each benefit including the date, who it went to, what it was, and how much it cost. This will make it easier to ensure you do not exceed the £50 limit.

It can also be beneficial to create a separate expense category for trivial benefits in your accounting system. This way, you can easily distinguish these gifts from other employee-related expenses and keep everything organised.

To incorporate tax-efficient gifting into your business strategy, please get in touch with our team.