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Did you know that certain costs incurred prior to the point in which you started trading are actually tax deductible? Better yet, did you know that this tax relief is claimable up to 7 years before you started trading? Well - you do now, so make sure you don't miss out!
In this article, we'll be talking more about the different types of pre-trading expenditure that you can claim for and how to include these in your tax return.
So, what exactly can I claim for?
Like when you actually start trading, to claim for pre-trading expenses, the expenditure incurred must be 'wholly and exclusively for the purpose of trade' - simply put, if the expense was an essential part of running your business, chances are, you can claim for it.
Let's talk examples (and refresh your memory of any costs that you may have forgotten!)...
Licences and professional subscriptions.
Did you need to obtain a licence before commencing your business? Perhaps you needed to pay a fee to your professional body? Well, this is something that you can claim for, so add it to the list!
Equipment.
This includes equipment purchased to be directly used as part of your trade, for example a camera if you're a photographer, a cash register if you're opening a shop. Other equipment that you can claim for is computer equipment and office furniture.
Website hosting costs.
Don't forget the costs involved in putting together your shiny new website! Whether that's web hosting costs, domain fees or the cost of hiring a pro to do it for you - add it to the list.
Business travel and accommodation.
...for example, costs incurred in going to a corporate conference, or visiting a potential new client or supplier.
Professional fees.
Maybe you consulted with an accountant on the best business structure for you, or perhaps you had a solicitor draft a contract for your clients - these are all things that we can claim tax relief on.
Advertising, marketing & PR.
Amounts spent on trying to promote your new business are totally valid costs to claim for - add them to the list!
Is there anything that I can't claim for?
There are a few expenses that you cannot claim tax relief on. More specifically...
Companies House formation fees.
It currently costs £50 to form a company on Companies House - this is a cost you cannot claim for.
Clothing.
We know that new business suit is going to make you look professional and stand out to new clients, but sadly, this is no-go. (psst - shall we start a petition to HMRC?)
How do I actually claim this stuff?
Claiming for pre-trading expenditure is as simple as including it in your tax return, with a purchase date of the first day of your financial year. For example, if you start your business on 12th June 2024, this will be regarded as the purchase date of the items.
But what if these expenses were incurred on my personal credit card?
This is super common and not a problem - for sole traders, simply just include the costs as normal in your self assessment tax return.
For limited companies, you can reimburse yourself for these amounts from the company.
Final thoughts.
You should definitely be claiming for any pre-trading expenditure, no matter how small - it all adds up.
It is understandable that a few expenses may have been forgotten about in the busyness of starting your business, particularly if your set up process takes a while. If this is the case, we recommend that you do not take any estimates for things that you think you may have incurred - be sure to back things up with a receipt / proof of purchase. Ultimately, when in doubt, do not claim.
Need help? We can verify that the business expenditure you've incurred is in fact claimable to prevent any HMRC headaches and save you tax. We charge a fixed fee of £200 for self assessment tax return preparation - you can contact us today here.