Claims for Hotels and equipment?

The_stingemeister

This is maybe the daftest question ever on here, but bear with me please. As a self employed person can I claim back the WHOLE of my hotel bill (while working away), plus the WHOLE amounts of any work wear and tools?

If you Google these questions, it says yes you can claim the tax back. But what exactly does this mean? Does it mean 20% of these totals come off your tax bill, so if you paid £5,000 pa on hotels, you get £1,000 off your yearly tax? Or does it mean the £5,000 is completely taken off your tax bill....I find this one  hard to believe.

A naive question yes.

Grumpy_chap

The_stingemeister said:

This is maybe the daftest question ever on here, but bear with me please. As a self employed person can I claim back the WHOLE of my hotel bill (while working away), plus the WHOLE amounts of any work wear and tools?

If you Google these questions, it says yes you can claim the tax back. But what exactly does this mean? Does it mean 20% of these totals come off your tax bill, so if you paid £5,000 pa on hotels, you get £1,000 off your yearly tax? Or does it mean the £5,000 is completely taken off your tax bill....I find this one  hard to believe.

A naive question yes.

You do your accounts to record income and allowable expenses.  Tax is calculated on the remainder.

If you are basic rate (England) tax payer and incur £1,000 of allowable expenses, that reduces your taxable income by £1,000 so you pay £200 less tax.

The allowable expenses have to be wholly, necessarily and exclusively incurred for the job.
  If you stay alone during the week in a budget hotel and eat in a local chain steak house, that is probably all allowable.
  If you stay away, and your wife joins you, and a five-star exclusive hotel, and fine dining, and all weekend, that is several indicators of non-allowable expenses.  At best, an element of proportional allowable expenses might be permissable.

Is the £5k for one night or for 100 nights?

The_stingemeister

Grumpy_chap said:

The_stingemeister said:

This is maybe the daftest question ever on here, but bear with me please. As a self employed person can I claim back the WHOLE of my hotel bill (while working away), plus the WHOLE amounts of any work wear and tools?

If you Google these questions, it says yes you can claim the tax back. But what exactly does this mean? Does it mean 20% of these totals come off your tax bill, so if you paid £5,000 pa on hotels, you get £1,000 off your yearly tax? Or does it mean the £5,000 is completely taken off your tax bill....I find this one  hard to believe.

A naive question yes.

You do your accounts to record income and allowable expenses.  Tax is calculated on the remainder.

If you are basic rate (England) tax payer and incur £1,000 of allowable expenses, that reduces your taxable income by £1,000 so you pay £200 less tax.

The allowable expenses have to be wholly, necessarily and exclusively incurred for the job.
  If you stay alone during the week in a budget hotel and eat in a local chain steak house, that is probably all allowable.
  If you stay away, and your wife joins you, and a five-star exclusive hotel, and fine dining, and all weekend, that is several indicators of non-allowable expenses.  At best, an element of proportional allowable expenses might be permissable.

Is the £5k for one night or for 100 nights?

Thanks. The £5k is over 12 months...One night 😄 I wish. So all expenses: hotels, work wear, tools, diesel, vehicle repairs and MOT/tax, evening meals can have 20% of these totals deducted from the tax bill?

MattMattMattUK

The_stingemeister said:

Grumpy_chap said:

The_stingemeister said:

This is maybe the daftest question ever on here, but bear with me please. As a self employed person can I claim back the WHOLE of my hotel bill (while working away), plus the WHOLE amounts of any work wear and tools?

If you Google these questions, it says yes you can claim the tax back. But what exactly does this mean? Does it mean 20% of these totals come off your tax bill, so if you paid £5,000 pa on hotels, you get £1,000 off your yearly tax? Or does it mean the £5,000 is completely taken off your tax bill....I find this one  hard to believe.

A naive question yes.

You do your accounts to record income and allowable expenses.  Tax is calculated on the remainder.

If you are basic rate (England) tax payer and incur £1,000 of allowable expenses, that reduces your taxable income by £1,000 so you pay £200 less tax.

The allowable expenses have to be wholly, necessarily and exclusively incurred for the job.
  If you stay alone during the week in a budget hotel and eat in a local chain steak house, that is probably all allowable.
  If you stay away, and your wife joins you, and a five-star exclusive hotel, and fine dining, and all weekend, that is several indicators of non-allowable expenses.  At best, an element of proportional allowable expenses might be permissable.

Is the £5k for one night or for 100 nights?

Thanks. The £5k is over 12 months...One night 😄 I wish. So all expenses: hotels, work wear, tools, diesel, vehicle repairs and MOT/tax, evening meals can have 20% of these totals deducted from the tax bill?

No.

You pay tax on profit, profit is sales less allowable costs, nothing comes directly off of your tax bill.

soolin

The_stingemeister said:

Grumpy_chap said:

The_stingemeister said:

This is maybe the daftest question ever on here, but bear with me please. As a self employed person can I claim back the WHOLE of my hotel bill (while working away), plus the WHOLE amounts of any work wear and tools?

If you Google these questions, it says yes you can claim the tax back. But what exactly does this mean? Does it mean 20% of these totals come off your tax bill, so if you paid £5,000 pa on hotels, you get £1,000 off your yearly tax? Or does it mean the £5,000 is completely taken off your tax bill....I find this one  hard to believe.

A naive question yes.

You do your accounts to record income and allowable expenses.  Tax is calculated on the remainder.

If you are basic rate (England) tax payer and incur £1,000 of allowable expenses, that reduces your taxable income by £1,000 so you pay £200 less tax.

The allowable expenses have to be wholly, necessarily and exclusively incurred for the job.
  If you stay alone during the week in a budget hotel and eat in a local chain steak house, that is probably all allowable.
  If you stay away, and your wife joins you, and a five-star exclusive hotel, and fine dining, and all weekend, that is several indicators of non-allowable expenses.  At best, an element of proportional allowable expenses might be permissable.

Is the £5k for one night or for 100 nights?

Thanks. The £5k is over 12 months...One night 😄 I wish. So all expenses: hotels, work wear, tools, diesel, vehicle repairs and MOT/tax, evening meals can have 20% of these totals deducted from the tax bill?

No, you show eligible costs as an expense when you do your accounts. 

Add them to the expense side of your account, expenses would as normal be deducted from gross income and the net amount subject to tax. So if you didn't have this expense your figures would be (just as an example)
£40,000 gross total income, less £10,000 allowable expenses = taxable amount of £30,000. With these expnses it would be £40,00 gross total income, less £15,000 allowable expnses = taxable income of £25,000.

Also, be careful with what you claim and make sure your records are perfect in case you are audited especially if expenses are high compared to gross income. My example also assumes you are using a basic cash basis for accounts, if that is the case then note capital expenses would not be deducted in whole .

If you are worried about how to claim, then approaching an acocuntant at least to assist with one years accounts might be useful.

soolin

My explanations are often confusing, so here is the HMRC guidance Cash basis: Overview - GOV.UK

Grumpy_chap

The_stingemeister said:

So all expenses: hotels, work wear, tools, diesel, vehicle repairs and MOT/tax, evening meals can have 20% of these totals deducted from the tax bill?

No.
It is as I said:

Grumpy_chap said:

You do your accounts to record income and allowable expenses.  Tax is calculated on the remainder.

If that is not straightforward enough, then keep a record of everything you receive as income and everything you spend and then pay an Accountant.

The_stingemeister

Grumpy_chap said:

The_stingemeister said:

So all expenses: hotels, work wear, tools, diesel, vehicle repairs and MOT/tax, evening meals can have 20% of these totals deducted from the tax bill?

No.
It is as I said:

Grumpy_chap said:

You do your accounts to record income and allowable expenses.  Tax is calculated on the remainder.

If that is not straightforward enough, then keep a record of everything you receive as income and everything you spend and then pay an Accountant.

I get it, I think. So in a simple example: You made £30k, you have £10k in allowable expenses.
That's £20k. The tax you pay from that amount has 20% taken off from the expenses. Making £22k net profit??

Bookworm105

The_stingemeister said:

Grumpy_chap said:

The_stingemeister said:

So all expenses: hotels, work wear, tools, diesel, vehicle repairs and MOT/tax, evening meals can have 20% of these totals deducted from the tax bill?

No.
It is as I said:

Grumpy_chap said:

You do your accounts to record income and allowable expenses.  Tax is calculated on the remainder.

If that is not straightforward enough, then keep a record of everything you receive as income and everything you spend and then pay an Accountant.

I get it, I think. So in a simple example: You made £30k, you have £10k in allowable expenses.
That's £20k. The tax you pay from that amount has 20% taken off from the expenses. Making £22k net profit??

blimey if you are struggling with that then please employ an accountant until your understanding is 101% better 

income 30 - expenses 10 = profit 20
tax on profit @ 20% = 4,000

net profit after tax 20 - 4 = £16,000

also be really careful with "workwear"
you can only claim the cost of purchasing PPE, not "ordinary" clothing
workman's trousers are not PPE even if they claim to be hardwearing or have knee pad pockets 
trainers are not PPE
socks, shirts,  underwear are not PPE

toe cap boots / trainers are PPE
purpose designed overalls are PPE 
a hard hat is PPE, a baseball cap is not 

Grumpy_chap

The_stingemeister said:

I get it, I think. So in a simple example: You made £30k, you have £10k in allowable expenses.
That's £20k. The tax you pay from that amount has 20% taken off from the expenses. Making £22k net profit??

No. No. No.

Using your example, the sole trader business has a total income of £30k.
The sole trader business has allowable expenses of £10k.  (That will include vehicle / mileage costs, hotels, tools, uniform, PPE, materials and equipment.)
That leaves the nett £20k.

The £20k is then subject to income tax calculated at the appropriate marginal rate.
Assume cash basis accounting.
Assume England.
Assume no other source of income.
Personal allowance (2024-25) is £12,570.  There is no income tax on this part.
The amount over the personal allowance (£20,000 - £12,570 = £7,430 is then subject to income tax at the rate of 20% which equals £1,486 income tax to be paid.

The result is £30k income to the business.
£10k allowable expenses incurred by the business.
£1,486 income tax paid.
£18,514 is your personal income after income tax.

That is a bit simplified as I have not considered NI contributions.

You never get to add back the income tax that has not been paid on the expenses.


While considering expenses, are you sure how you will account for travel (van) costs?

The_stingemeister said:

So all expenses: hotels, work wear, tools, diesel, vehicle repairs and MOT/tax, evening meals can have 20% of these totals deducted from the tax bill?

You can either claim the vehicle (including cost to purchase) as actual cost basis (which needs to be proportioned for private use), or you can use the approved mileage rates.  You cannot do half and half.



I really think you need to engage the professional services of an Accountant as soon as you can to get advice on how to record your income and expenses simply so that the Accountant can advise on the appropriate allowable expenses and the resulting tax liabilities.
The Accountant may identify allowable expenses you have not considered.
The Accountant will be able to advise on any expenses you have considered that are not allowable.
The Accountant will be able to advise the most tax-efficient way to recover mileage expenses.
The Accountant will be able to advise on the tax liability, how to pay the tax, and correct filing for tax.  Plus NI.
The Accountant will be able to ensure you do everything correctly so do not incur penalties for late filing, late payment, etc.  (Assuming there are no penalties already associated to past trading.)


As an aside, I think @Bookworm105 had a typo when they stated the tax but, coincidentally it works out about right when personal allowance is also considered. 
EDIT - I note that Bookworm has corrected their post.  The reason for the difference in tax between Bookworm (£4k) and me (£1.5k) is Bookworm has apparently assumed other income so all the sole-trader income is at marginal rate where I assumed no other income so the sole-trader income benefits from personal allowance.


Please engage the professional services of an Accountant.
Please do.

MattMattMattUK

Grumpy_chap said:

Please engage the professional services of an Accountant.
Please do.

Just for clarity, in case Grumpy's statement was not clear enough, otherwise this is going to be a total car crash.

Please engage the professional services of an Accountant.
Please engage the professional services of an Accountant.
Please engage the professional services of an Accountant.
Please engage the professional services of an Accountant.
Please engage the professional services of an Accountant.