Minerva Accountants Bristol and Somerset
Fully digital Xero accountants for consultants & service businesses
Business entertaining is not allowed for VAT or Corporation/Income tax purposes.
The only exception is staff entertaining. I’ve written on this separately if you want the detail but it must be below £150 per person per year.
Customer and supplier entertaining are never allowable and this is one of the many adjustments that we make when we prepare your tax returns.
The rules are different for sole traders and for companies.
Generally sole traders can NOT claim for eating out. Eating is not ‘wholly, exclusively and necessarily for the purposes of business’ because it fulfils the dual purpose of keeping you alive!
Employees of limited companies can claim if the meal is wholly and exclusively for business purposes. If business reasons require them to be away from home/office around mealtimes (so that they are unable to make their usual arrangements) then it is a reasonable business expense.
The amount they can claim for a meal will be agreed with their employer but should not be overly lavish and I would suggest limiting alcohol to one drink with the meal.
Entertaining is generally not allowed (see other Tax Tips on staff entertaining) for tax or VAT purposes
If you work from home because you have no other premises, then you can claim £6pw tax free use of home allowance as a contribution to your bills.
If you use a substantial part of your home for business, then it may be beneficial for the director to rent part of their home to the business. (As this is a commercial letting it is not applicable for the rent a room allowance)
You should have a rental licence between the director and the company showing the agreed rent and the hours available. The rent may be set at the level of the costs. This rent will reduce corporation tax for the business. The director will then show the rental income and costs on their income tax return. If the rent = costs, there will be no tax to pay. If income exceeds costs, then the director will pay income tax on the profit but there is no national insurance.
Costs that can be included are:
There may also be some relief for mortgage interest (but not repayments so do ensure that you split the monthly charge)
The costs should be apportioned across the available space by floor area or number of rooms (excluding kitchens and bathrooms). You can choose the most beneficial method, but you cannot keep changing it. In practice it is often simplest to allocate the household costs by the number of rooms.
If the room is used full time for business, then when you come to sell your home, you may have to pay capital gains tax on this portion of the property. In practice you will probably only use the room part time. If your spare room doubles as your office 5 days per week then 5/7 of the costs can be claimed to offset the rent from the business.
Reply to this email if you’d like a spreadsheet to calculate how much you can claim
If you are a sole trader or landlord with (combined) income over £20,000 per year you need to take action now.
You need to be keeping digital records (eg Xero or Zoho Books), up to date bookkeeping, and making quarterly submissions from April 2026* onwards. This means that you will be trying to figure out the new regime at the same time as completing your 2025/26 tax return so we recommend getting your bookkeeping onto software and up to date NOW so that you can complete your 2025/26 tax return asap.
*For those over £50kpa. There is a staggered start for those earning less than this.
It seems really simple, you pay a very small fee and set up your own company on Companies House but did you know that you have many legal responsibilities as a director? The sort that mean you might personally be fined or go to jail? Here are some of them.
Whilst it might feel good to be the director of your own company you have several responsibilities as directors under the Companies Act 2006:
Being a director doesn’t come with a compulsory training (although I do offer a course) so please make sure that you don’t fall foul of the law.
If you work from home because you have no other premises, then you can claim £6pw tax free use of home allowance as a contribution to your bills.
If you use a substantial part of your home for business, then it may be beneficial for the director to rent part of their home to the business. (As this is a commercial letting it is not applicable for the rent a room allowance)
You should have a rental licence between the director and the company showing the agreed rent and the hours available. The rent may be set at the level of the costs. This rent will reduce corporation tax for the business. The director will then show the rental income and costs on their income tax return. If the rent = costs, there will be no tax to pay. If income exceeds costs, then the director will pay income tax on the profit but there is no national insurance.
Costs that can be included are:
There may also be some relief for mortgage interest (but not repayments so do ensure that you split the monthly charge)
The costs should be apportioned across the available space by floor area or number of rooms (excluding kitchens and bathrooms). You can choose the most beneficial method, but you cannot keep changing it. In practice it is often simplest to allocate the household costs by the number of rooms.
If the room is used full time for business, then when you come to sell your home, you may have to pay capital gains tax on this portion of the property. In practice you will probably only use the room part time. If your spare room doubles as your office 5 days per week then 5/7 of the costs can be claimed to offset the rent from the business.
Companies can claim 100% First Year Allowances on brand new electric cars with zero CO2 emissions purchased before 31 March 2026. Unincorporated businesses can claim until 5 April 2026. For second hand electric cars or hybrid vehicles with <50g/km emissions you can claim 18% written down allowance per year.
Benefit in kind for directors/employees of limited companies is based on a percentage of the list price which is increasing each year,
For unincorporated businesses all costs and capital allowances must be apportioned between business and personal use. This means that you must keep mileage records to support the split.
Should sole traders take advantage of the £1k trading allowance or utilise losses instead?
£1,000 trading allowance is available for use across your sole trader businesses (one allowance per person, not per business!)
If you have a small side hustle or startup with income (not profit) of less than £1,000pa then you don’t need to report this to HMRC
BUT
you might choose to do so.
If the business is making a loss then you can either offset this ‘sideways’ against your other personal income in the same year to reduce the overall tax paid OR carry it forward to set against future profits from the same business and therefore minimise future tax.
This sideways loss relief is particularly useful if you are starting your business as a side hustle to your main employment.
MTD (Making Tax Digital) for corporation tax has now been shelved as HMRC are turning their attention to e-invoicing which will have the same effect.
In the meantime MTD for sole traders and landlords is still going ahead
April 2026 for those with income (ie turnover, not profit) >£50kpa
April 2027 for those with income >£30kpa
April 2028 for those with income >£20kpa
In order to be compliant we recommend that you
2. Connect you bank account
3. Keep your bookkeeping up to date each month
4. Consider joining our monthly bookkeeping sessions which provide both accountability and advice on how to do your bookkeeping (on any system) and some Xero tips.
When we complete a corporation tax return we always suggest that our clients pay their tax bill sooner rather than later as HMRC will pay them a small amount of interest AND it means that they won’t forget to pay. Especially now that HMRC have stopped sending reminders.
HMRC interest rates vary as they are linked to the Bank of England base rate.
If you pay early you will receive interest at base rate minus 1%, so currently 3.25%. (There is a minimum floor of 0.5% if the base rate goes very low). The interest is calculated from the date that you pay until the date you are due to pay.
Yes, you can get better returns on your savings elsewhere, especially as you know when you will need to withdraw it to settle your tax bill.
But, if you forget and pay late, you will pay interest at base rate plus 4%, so currently 8.25%. The interest is calculated from the due date until the date that you actually pay.