Row of coins in piles of various sizes, with a miniature money bag on top of each with "Tax" on the bag
Tax reliefs, allowances, and expenses for businesses

Maximising tax efficiency is an important part of running any business. But the range of reliefs and allowances can be confusing, especially because they vary depending on the structure a business operates as – for instance as a limited company, a sole trade or a partnership.

HMRC publish a range of guidance to help businesses claim what they’re entitled to, whilst remaining compliant with their relevant tax obligations. The key guidance has recently been gathered into a collection page on tax allowances, reliefs and allowable expenses, which should be a useful first port of call to help businesses of all types understand what tax reliefs they can benefit from.

Business Expenses

Various business expenses can be deducted from taxable profits where they are incurred wholly and exclusively for business purposes. Common deductible expenses include:

  • Staff costs: salaries, pensions, and employee benefits.
  • Office expenses: such as rent, repairs, utilities, and office supplies.
  • Travel expenses: for staff performing business duties, including reasonable subsistence costs.
  • Marketing costs: related to advertising and subscriptions to trade journals.
  • Professional fees: paid to accountants, lawyers, or consultants for business-related services.

Tax Reliefs

Tax reliefs are commonly designed to incentivise certain actions and behaviours by reducing the amount of tax a business or individual has to pay.

For example, tax reliefs are available to businesses who donate money or assets to registered charities.

  • Sole traders and partners can claim tax relief on charitable donations in order to reduce the amount of their income which is subject to higher and additional rates of income tax.
  • Limited companies can deduct qualifying donations from their taxable profits to reduce their corporation tax liabilities.

Limited companies can also benefit from other forms of tax relief, which aren’t available to unincorporated businesses. For instance, Research and Development (R&D) Tax Relief, which is aimed at encouraging innovation, and can result in significant tax reductions for companies involved in qualifying activities, whilst Creative industry tax reliefs can help companies reduce their tax burden where they are involved in producing and developing TV and film productions, amongst other activities.

Allowances

Claiming Capital Allowances can provide tax deductions where businesses buy machinery, office equipment, certain vehicles, and incur qualifying expenditure on their premises.

The Annual Investment Allowance (AIA) is a particularly flexible capital allowance, which allows businesses to deduct up to £1m per year of qualifying capital expenditure from their taxable profits, providing significant upfront tax relief when investing in capital assets. Limited companies may also benefit from full expensing if their qualifying capital expenditure exceeds £1m.

For businesses with employees, the Employment Allowance is a key benefit that can allow eligible employers to reduce their National Insurance Contributions cost. The amount of Employment Allowance available, and the range of employers who can benefit is increasing from April 2025, as covered elsewhere in this month’s Employer Focus.

If in doubt, get professional advice

Navigating the complexities of tax reliefs, allowances, and deductible expenses is crucial for employers wanting to operate tax efficiently.

As is often the case with tax, the rules governing allowances, reliefs and expenses are often subject to change, so staying up to date is crucial. Given most employers have other demands on their time, this can be a challenging task, so seeking professional advice can more than pay for itself if it prevents a business from missing out on valuable tax reliefs.

Our Find an ATT member service can help with finding qualified advisors to assist with deductible expenses, tax reliefs and allowances.

 

This article reflects the position at the date of publication shown above. If you are reading this at a later date you are advised to check that that position has not changed in the time since.  

We regularly publish articles on a range of tax and wider topical issues which affect employers. If you wish to subscribe to our monthly Employer Focus e-newsletter, please contact us.