Are financial advisor fees tax deductible in UK? This and other self-employed expenses are discussed in this article, covering which expenditures are tax deductible and not and other relevant questions about allowable business expenses.
Are Financial Advisor Fees Tax Deductible 2024?
Any running costs that are wholly and exclusively used for the business are considered allowable expenses. Given that the financial advisory service is used wholly for the business, the expense counts as allowable tax deductions under the category of legal and financial costs.
What Legal and Financial Costs Are Tax Deductible?
Expenses solely used for the business’ accounting, legal, or professional needs are considered allowable self-employed expenses. Allowable legal and financial costs include but are not limited to the following:
- Employing accountants, surveyors, architects, or solicitors
- Professional indemnity insurance premiums
- Bank, credit card, and other financial costs (e.g., lease, purchase interest, bank and business loans, overdraft or bank charges, alternative finances payments, etc.)
- Other business insurance policies (e.g., public liability insurance)
- Bad debt (due to customer delayed payments)
It is highly recommended to seek further guidance from tax professionals, most especially when claiming business expenses through the UK income tax return. Submitting accurate returns is crucial to avoid penalties from HMRC.
What Can You Not Claim for Tax Deduction?
Some legal and financial costs do not count as allowable expenses, such as the following
- Penalties for violating the law
- Overdraft, loan, or finance arrangement repayments
The legal costs of purchasing machinery and property are claimed as capital allowances, which is another kind of tax relief with more intricate rules. Check out our guide for capital allowances on property investment to get a glimpse of how this relief works.
Whilst bad debts are claimable as allowable expenses, they cannot be claimed for several reasons, especially if the business uses cash basis accounting. Non-claimable bad debts, in particular, are those excluded in income, where fixed assets are sold, and improperly calculated.
Any costs incurred by the business but used for personal purposes are automatically disqualified as an allowable expense. However, there is a special rule for expenditures used for both personal and business reasons. In this case, self-employed people must seek guidance from tax experts.
Other Allowable Self-Employed Expenses
Other allowable expenses, if they are wholly and exclusively used for the business, can be deducted from the taxable income, including those that are used for:
- Office (e.g., phone bill)
- Travel (e.g., parking, fuel, train fare, etc.)
- Clothing (e.g., uniform)
- Employees (e.g., salary, sub contractor wages, etc.)
- Raw materials or stocks
- Business premises (e.g., lighting, heating, etc.)
- Marketing or advertising
- Training courses
Frequently Asked Questions
UK businesses can claim allowable expenses without the need for receipts. However, being able to provide most of them, supplemented with other reliable documents, is good practice in the eyes of HMRC.
Pre-trading expenses can be deducted from taxes if they were accrued within seven years of starting the business. Those expenses must be treated as if they were spent on the very first day of trading.
Expenses are the costs incurred by a business that does not capitalise.
Business expenditures can reduce taxable income. In the UK, tax-deductible expenses are usually under the category of allowable business expenses and capital allowances.
Yes. Businesses’ legal and financial costs are tax-deductible.
Most Trusted Tax and Financial Advice in the UK
Are financial advisor fees tax deductible in UK? They count as allowable expenses, and so, can be claimed in tax returns. Expert advisory is most crucial for startups, whether a sole trader or a limited company, to avoid failing right from the outset. Many startup businesses tend to be one-manned, where the owner juggles everything, from marketing to taxes.
Legend Financial tax and business development advisors are one of the most trusted in the UK. We have been in the industry for over ten years, with offices around several regions, so you have the option to receive advice in person or online. For your tax, accountancy, and business development needs, reach us today!
