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Starting up:
Business expenses

The general rule for whether or not an expense is deductible for income tax purposes is that the expense must be incurred wholly and exclusively for the purpose of your business.

Typical expenses include:

Purchases of goods for sale by your business
Rent and rates
Employee costs
Telephone
Light and heat
Motor and travel expenses
Administrative expenses such as postage and stationery
Accountancy fees
Bank charges and interest
Hire purchase interest

If you are self employed, any amounts you take out of the business are classed as drawings and not wages or salary. You should not operate PAYE on these amounts and they do not reduce your profit. You could, however, pay a salary to your spouse so long as the salary was reasonable in relation to the work performed.

Where an expense includes an element of private use, such as possibly in the case of telephone, motor expenses and the lighting and heating of a home office, you must work out the proportion of those expenses that are applicable to your business.

You do not get any tax relief on certain expenses such as business entertaining or fines.

Expenses which might be classed as capital rather than revenue include:

repairs and renewals (for example, if the expense represents the cost of a new asset)
legal and professional fees (for example the legal costs of acquiring a property are classed as capital)