Business expenses ― general rule

By Tolley

The following Personal Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Business expenses ― general rule
  • General rule for deduction of expenses

Taxable earnings less allowable deductions (from the same employment) gives net taxable earnings for the year. See the Employment income guidance note for a definition of taxable earnings. If the allowable deductions exceed the taxable earnings, the net taxable earnings figure is nil. It is not possible to have negative net taxable earnings.

ITEPA 2003, s 11

However, a claim can be made for excess allowable deductions to be set against total income (a step 2 deduction, see the Proforma income tax calculation guidance note). See Simon’s Taxes E4.799 (subscription sensitive).

ITA 2007, s 128

Allowable deductions from employment income broadly fall into five main categories:

  • expenses deductible under the wholly, exclusively and necessarily general rule, see below (ITEPA 2003, s 336)
  • travel expenses, which includes deductions for approved mileage rates, accommodation and subsistence, see the Business travel and subsistence expenses guidance note (ITEPA 2003, ss 337, 338)
  • payments made by an employee to an occupational pension scheme (usually deducted from salary and do not form part of the income figure on the form P60) (FA 2004, s 193)

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