Is your Website Tax deductible?

Is your Website Tax deductible?

Jamie Carter
Managing Director

The cost of building a website can vary depending on several factors. Sometimes your Web Design Agency might not mention the hidden costs. These include the cost of a domain name, website hosting, an SSL certificate, or even website content,. Other hidden costs can include ongoing maintenance and support costs. It's important to consider all of these factors when budgeting for a new website. 

However there is also good news! Additionally, the cost of building a website can be offset by claiming tax deductions for certain expenses, such as those related to research and development or capital allowances for website development costs.

The cost of setting up your startup website, or improving your existing website

If you have  started an online business and are spending a significant amount on developing a website, you may be wondering about the rules for claiming a tax deduction for the costs. You may be concerned that the expenses could be considered capital, meaning you wouldn't be able to claim an immediate tax deduction.

In the past, the taxman considered website development costs to be similar to the cost of a shop window, which is a one-off capital cost that is not usually eligible for tax deductions. However, HMRC now recognizes that many websites provide customers with ways to order goods or services, communicate with the business, and find information on products and services, which are all considered functions of a business. Therefore, certain website costs can be considered "plant and machinery" and eligible for capital allowances as part of the annual investment allowance (AIA). 

This means you can claim a tax deduction of up to £200,000 for the financial year in which the expenses were incurred.

On-going website costs

Expenditure on the purchase of a domain name, hardware, and operating software that relate to the functionality of the website may be eligible for capital allowances. Costs for ongoing website maintenance, such as updating content or changing product details, are treated as regular business expenses and deducted from profits. Initial research costs for website development may also be deductible from business profits, as are costs for advertising the business on the website.

As always, it's important to keep detailed records of website expenses to ensure they are allocated correctly for tax purposes.

R&D Tax Credits

If you are developing a website as part of a new research and development project, it's worth considering whether you may be eligible for research and development (R&D) tax credits. This can be a complex area, so it's important to seek advice if this applies to your situation. R&D tax credits can provide a significant financial benefit for businesses engaged in qualifying R&D activities.


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