If you run a limited company from home, a proportion of the expenses used for business can be charged against your profits, which means you subtract those costs from your total taxable income when filing your tax return.

This guide from SmallBusiness.co.uk and Clive Lewis, head of SME issues at the Institute of Chartered Accountants in England & Wales (ICAEW), will help you find out how.

Home offices

If a room or space in your home is used for the business, you can calculate the proportion of the house used and charge the appropriate percentage of council tax, heating and lighting and so on, to the business. This is also the case for a telephone for both business and personal use.

Care must be exercised, however, to ensure the claim is proportionate to the actual usage in each case.

However, if you sell the property at some time in the future, the Inland Revenue might take the view that the area used as an office should be disallowed from the exemption for capital gains tax for the main domestic residence, which means that part of any gain on the sale of the house could be subject to capital gains tax.

Equipment

Any equipment purchased for the business can be counted as capital expenditure and can qualify for tax allowances, called 'capital allowances', which means a proportion of these costs can be deducted or ‘written down’ from your taxable profits and reduce your tax bill.

In a typical list of equipment, a computer and office equipment are ‘capital items’, so you can deduct 50 per cent of their cost from your tax return if you are in your first year or 25 per cent thereafter.

Vehicles

If a car is used in the business, a proportion of the cost of running it - such as petrol, repairs or servicing - might be allowable as well, as a 25 per cent write down. Alternatively, you can charge 40p per mile (up to 10,000 miles). To claim car expenses against your business profits you need to keep a record of mileage.

Purchasing a van has a number of advantages for a businesses. If you are VAT registered and it is a new van, you can reclaim the VAT on the sale. If the van is second hand, reclaiming VAT depends on whether the person who sold you the van had paid VAT when they purchased it.

Determining if your vehicle counts as a van or a car can be a bit of a grey area. If it has no windows on its sides or no rear seats, it will usually be considered a van.

Other items

Other items might be eligible as deductions in your self-assessment return if they are wholly and exclusively used in the business. Clothing is generally not allowable unless there is some specific work-related items that are not wearable outside the business. Probably the best place to look for further details is the Inland Revenue’s Notes on Self-Employment, which can be located by clicking here.

For more information on VAT contact the VAT advice line on 0845 010 9000.

Click here for further information on capital allowances.