List of Tax Deductions that Are Often Overlooked
Clear from the name itself; overlooked tax deductions are the ones that are often forgotten to be included in the annual bill. It’s important for an accountant to go through every aspect and look for any additional tax savings. That’s because if you overlook or ignore any tax deduction, the income tax bill becomes more than what it should be.
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9 Tax Deductions that Are Often Overlooked
From missing receipts to specific home office expenses, a lot of things are counted under forgotten tax deductions. Other than that, here’s a list of some other common tax deductions that shouldn’t be overlooked.
If you haven’t included any of these, let your accountant know and get it covered.
#1 Home Office Expenses
One of the most common forgotten tax deductions is related to the home office. If you have a home office and use specific stuff during working hours, then they are also subjected to a tax deduction. Make sure to keep track of the things you are employing. This includes electricity, gas, furniture, and even internet bills.
Note that you need to keep track of the total working hours and usage portions. Say, if you are using a table (cost £200) entirely for office purposes, then you can claim the total amount in the tax deduction. But, if you are using it for individual purposes, say half of the time, you can claim the other half, i.e. £100 for a tax deduction.
#2 Capital Allowances
The expenditure that any company/business claims against the taxable profit is called capital allowance. This is applicable for all the assets that are owned by the company/business that claim for the same.
Anything that you use in your business be it equipment, systems, or technologies, are valid for claiming as a capital allowance. Note that this rule is also applicable to the used assets.
Say, if you got an asset that was used earlier but now you want to utilise it in your business. In that case, you may get values on the basis of their first-time use for the business. Additionally, anything that you use partially for your business can be included as partial claims in your annual bill.
#3 Missing Receipts
Many times you buy certain things but lose the receipts or invoices. In fact, numerous people don’t even have it in the first place. If that happens, do not avoid the situation. Instead, inform the accountant. That’s because you can still claim the cost of the item if you have lost the receipts.
Besides invoices, there are numerous ways to prove that you bought a particular item. Of course, any fake or irrelevant claim wouldn’t be accepted. But reasonable expenditures wouldn’t be rejected.
#4 Cars and Motor Expenditures
It’s quite common to use a car for business purposes like operations, travelling, or anything related. If you do it too, then that expense can be counted under tax deductions. Note that it doesn’t have to be used every day to be claimed as tax deductions. Instead, if you use cars for occasional purposes also, that cost would be included.
As a benefit, an extra cost of 5p per mile is charged if you take any business partner/employee for any ride concerning the business. So, next time you use the car for business purposes, do not forget to mention the details to your accountant.
#5 Clothes and Costumes
No, you cannot claim the entire wardrobe for tax deductions, of course, but there are specific clothing items that you can include. These are generally the ones that are work-related. Let’s say, work-related uniforms, costumes, any protective clothes, etc.
Again, you cannot claim the personal clothes that you wear for work. It should be only the work-specific ones and not general items. If you wear work-specific clothes, you can include the complete cost for tax deductions in the annual tax bill.
#6 Marketing Costs
Ironically, people often forget about the most important expense for their business, i.e. marketing costs. Her Majesty’s Revenue and Customs (HMRC) allows tax deductions for your marketing initiatives, including advertisements, mail advertising, digital marketing costs like web hosting and maintenance, etc.
Additionally, they also allow you to claim any free samples (if any). Note that other options like hospitality expenses are not included within the same.
#7 Interest and Finance Charges
Besides marketing costs, interest and finance charges are also applicable to claim for tax deductions. In a business, you may get interests like mortgage interests, personal loans, credit card interests, etc. Thus, you can claim these interests for a tax deduction in the upcoming annual bill.
Additionally, you can claim tax deductions for any borrowed money for the business. If you are a business owner/partner who has borrowed money to flourish your business, let’s say. That amount could be claimed as a tax deduction through a tax return.
#8 Staff Expenses
Staff expenses are also included in the list for tax deductions. Thus, if you have permanent/part-time employees working for you, track down their expenses and consider them in the annual bill. The best part about staff expenses is that it has a vast expenditure.
Be it salaries, bonuses, pensions, benefits, training courses, etc., every business-staff related expenditure is added within the same. Of course, there are some exceptions in this staff list! For example, you cannot claim the expenses concerning the nannies or babysitters.
#9 Family Payments Related to Business
There might be scenarios where you must have included a family member in the business. In that case, you can claim the cost that you paid them for doing the work. This is one of the most prevalent tax deductions that people forget.
So, if you have forgotten it earlier, ensure that it doesn’t happen again. Make sure to track down such expenses and tell them to your accountant. They will tell whether you can include the expense in the annual bill or not!
Tax deductions are an important part of your finances as it reduces the cost from taxable income and saves tax. Moreover, the money that you save could be easily invested in relevant areas. Thus, do not miss any possible tax deduction, as listed above!