Are marketing expenses tax deductible?

Marketing is essential to finding new clients for your small business. But are marketing expenses tax-deductible? Knowing the answer to this question can help you save money where you can on taxes. 

This guide will discuss if marketing expenses are tax-deductible, including: 

• Why are tax-deductible expenses important?
• Which marketing expenses are tax-deductible?
• How can you claim and record these expenses effectively? 

Businesses typically have to spend money to earn it. Luckily, expenses that solely benefit your business may be tax-deductible. In other words, they’re costs that you can claim to reduce your taxable income and lower your tax bill. But to claim these expenses, you’ll need to maintain clear records and proof of these expenses.

Knowing which business expenses are tax-deductible is essential to reducing your taxes. Since your operations are on a smaller scale, missing eligible expenses can hurt your small businesses finances. You need to save as much of your earnings as possible to grow. 

Without a marketing strategy and budget, your business will likely fail to earn enough for success. But are marketing expenses tax deductible? Yes, some are, so it’s essential to know which. 

Marketing expenses you can claim, include: 

• Advertising costs 
• Bulk mail
• Free samples
• Website costs
• Sponsorship payments to charities
• Some subscriptions

Tax-deductible marketing expenses include advertising placements for your business. These adverts may be in magazines, newspapers, or digital media, such as Google Ads or social media. 

On top of this, you can claim the costs of bulk mail. For example, if you send out batches of mail to market your business, you can claim the expenses of designing, producing, and mailing these materials. You can also claim the costs of creating and distributing free samples with your logo to promote your business.

A website is an essential part of the accessibility of any small business, and you may want to invest in making it look professional. Luckily, website costs, such as design and web hosting, are tax-deductible.

When it comes to charitable donations, you can only claim the costs if you invest in sponsorship payments. You must receive something in return for your contribution. For example, the charity may openly support your business or display your logo at their events. 

Lastly, you can also deduct the costs of trade journals or membership fees at industry organisations. These investments can help you learn more about the industry and network your business. 

Still, there are some marketing expenses you can’t claim, including: 

• Entertainment 
• Gifts
• Charitable donations
• Political donations

You cannot reduce your tax bill by entertaining clients or suppliers to grow your business. So you can’t claim the costs of events, accommodations, and food or drink. For example, say you bring a client out to dinner to discuss a project. You can’t claim the costs of that dinner. Along the same lines, you can’t claim gifts you give to market your business to potential clients. 

Also, charitable donations that aren’t sponsorship payments and donations to political parties aren’t tax-deductible. 

Learn more about which marketing expenses are deductible on the UK Government website. 

Once you know which marketing expenses you can claim, you’ll need to track how much you spend on them and create a system to maintain accurate records. 

Precise bookkeeping is essential to filing your taxes. In fact, The HMRC expects you to keep these records for about six years. Be sure to outline the amount of each transaction, the date, and the purpose. On top of recording transactions, make sure you keep proof, including receipts and bank statements. 

To keep this up to date, set aside time each day to accurately input information for your records and highlight tax-deductible expenses to claim when you file your taxes. 

When it’s time to file your Self-Assessment tax return, you can add up your tax-deductible expenses and claim the total amount. The HMRC may ask you to provide proof.  

You’ll need to separate your business finances from your personal ones for clear financial records. To do this, open a business current account if you don’t already have one. This bank account, specifically for your business, will help you track and find your expenses more easily because you won’t need to shuffle through personal transactions. 

On top of a business current account, the right modern accounting software will help you organise and better understand your finances. The Countingup app, trusted by 40,000 business owners, is the best of both worlds because it’s a business account with built-in accounting software. With all your finances in one place, you can stay on top of your finances and track your performance efficiently.

Countingup’s tools simplify the taxes process with tools like automatic expenses categorisation. This feature labels your payments with HMRC approved categories to find proof of tax-deductible expenses. Then, the receipt capture tool reminds you to snap a picture of your receipt when you make a payment to avoid messy piles of receipts. 

The app also generates tax estimates to help you plan ahead. Countingup is even Making Tax Digital (MTD) compliant, meaning it helps you follow the government initiative to digitise and simplify the tax process. Though MTD is only required for VAT-registered business right now, it will expand over time, so it’s good to be aware of. 

The app automatically calculates VAT on your transactions and makes it easy to share your bookkeeping with your accountant instantly without worrying about duplication errors, data lags or inaccuracies. Seamless, simple, and straightforward! 

Financial management can be stressful and time-consuming when you’re self-employed. That’s why thousands of business owners use the Countingup app to make their financial admin easier. 

Countingup is the business current account with built-in accounting software that allows you to manage all your financial data in one place. With features like automatic expense categorisation, invoicing on the go, receipt capture tools, tax estimates, and cash flow insights, you can confidently keep on top of your business finances wherever you are. 

Start your three-month free trial today. 

Find out more here.