How To Make Your Website Costs Tax Deductible by 100% this year?

website costs tax deductable
How much does it cost to build a website? NOTHING! Not a penny, Nada, Zilch... providing you cover the following and make your website costs deductible.

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A common question I get asked is “How much does it cost to build a website?”, a fair question to ask if you are considering forking out a considerable amount of your marketing budget on getting a new website, or simply renewing an existing website.

The simple answer to that question is NOTHING! Not a penny, Nada, Zilch… providing you cover the following and make your website costs deductible.

At a networking event recently and got asked that exact question, “how much does it cost to build a website or replace a current website?” my reply was “how much do you want it to cost?”. The look of bemusement was almost comical, it certainly wasn’t the reply they were expecting. The simple truth is, if you know the rules when claiming a tax deduction, the cost of your website is irrelevant. Many people think that a website has to be classed as capital, not realising that you can make your website costs tax-deductible by 100% this year.

So how do I make my website costs tax-deductible?

Have you ever heard someone say “Your website is your digital shop window”? Well, it is, if you want to lose your hard-earned cash.

A taxman considers a generic website to be ‘similar’ to a physical shop window – displaying your business offerings to potential customers in a digital format. 

It used to be that HMRC would consider that the cost of website development was like the cost of a shop window and is not an everyday expenditure but a one-off capital cost. You can only claim for this type of expenditure when it qualifies for capital allowances.

To qualify for capital allowances, the rules a simple. Whatever you have spent money on MUST perform a function within your business

Because a shop window display, and in this case, a generic website digital display, would mean that no tax deduction for the cost of a website development would have been previously allowed. 

How to make your website functional to qualify for the Capital allowance

As we covered above, to make your website costs tax-deductible and qualify for capital allowances your website must perform a function within your business. 

What this means is that you simply can’t have the website tell people about your business and provide them with your contact details, the website has to actually do something. 

You must provide your customers with a method of ordering goods or services, valid means of communicating directly with your business or providing means where your customers can get more detailed information on the products or services which you supply. All of these are specific functions and as such, certain website development costs will qualify for capital allowances, falling under the category of ‘plant and machinery. 

  • Ordering goods or services – Do you have an eCommerce website or can customers complete an order form and book your services directly from the website?
  • Can customers use a chat function on your website or complete a contact form which then populates your CRM system?
  • Can customers search and find information or download product manuals, information or brochures about your services?
  • Have you purchased a domain name for your business website and use this for your email address? ie info@twistedspire.co.uk 
  • Do you, own hardware which relates to the functionality of the website such as servers?
  • Have you purchased software or licences which relate to the functionality of the website such as premium plugins?

If the answer to any of the above is yes, then the expenditure is treated as plant and machinery and capital allowances can be claimed as part of the annual investment allowance (AIA), deducting the full value from your profits before tax up to £200,000 for the financial year which you incurred the expense making your website costs tax-deductible.

Development costs for a rebuild of your current business website ( even using the same domain name) may also be classed as an expenditure that qualifies for capital allowances.

What you can’t claim for

Unfortunately, there are some things which you can not claim for, such as the ongoing website content maintenance, updating content, changing product details and price lists as this is classed as any other day-to-day running costs. 

However, maintenance-type costs incurred such as through purchasing Twisted Spires Customer Care Packages where we provide a full maintenance service for your website are tax-deductible.  

Some expenditures can be difficult to categorise which is why you should ensure that you employ a suitably qualified accountant to assist you in keeping a detailed breakdown of costs and correctly categorising your expenditures for tax purposes. 

Some costs, such as those incurred when utilising Twisted Spires agile web design process where initial and post-in-depth research for the development and redevelopment of your website costs can qualify as a tax deduction from your business profits.  

Summery

How many of you are now re-evaluating that last quote you received to rebuild your ageing and underperforming website or considering off-loading the daily maintenance and security checks of your website?   Perhaps it’s time you spoke to us at Twisted Spire and see what we can do for you and your business, helping to reduce your stress, boost your sales… and save you money! Now that’s a service worth paying for, don’t you agree?

Here at Twisted Spire, we work closely with all of our clients as if they integral part of our own business. In fact – you are a part of our business which is why we aim to provide you with the very best service which we can and help to make your business a success. 

YOUR success is OUR success

If you liked this article and have benefited from making your website costs tax-deductible, please share it with your followers.

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