Financial advice is a valuable asset in the world of investing. The advice you receive can be vital to
future purchases or investments of your company’s funds. These services can come at a cost, however.
Several financial advisers’ charges can vary between £100s per hour or several thousands
of pounds for a set piece of work. Claiming this expense through tax deductions could save you or
the company a lot of money, allowing you to reinvest rather than spend.
But, how do you find out if the expense is tax-deductible? Currently, there are no set rules for the
deductibility of financial advice. Your eligibility is dependent on the ordinary deductibility rules.
Within this article, you'll discover key details regarding tax deductions and financial advice. This
provides you with the knowledge to evaluate whether or not your financial advice can be claimed on
What is Tax Deduction?
For job-related expenses, you may be entitled to claim finances back through a tax deduction. To be
classed as tax-deductible the expenses must have been paid by you without any reimbursement
from employers and be in direct relation to your or the companies income.
A tax deduction would allow you to claim back the charge from the tax on the item or service that
was purchased in relation to your job. This could mean that the 20% tax charge from a £100 cost for
work resources is returned, providing you with a £20 tax return.
Are Financial Advice Fees Tax Deductible?
Financial advice is a valuable resource for many investors. Knowing the smartest and most efficient
option for investing your money can reap long-term benefits if the correct choice is made. The cost
of this advice can be expensive, however. This leaves you with less money to capitalise, due to the
time spent learning how to invest. Discovering whether financial advice is tax-deductible is a
valuable piece of information that could save you hundreds of pounds each year.
The demand for this information is high, investors want to know which advice expenses are and
aren't tax-deductible. Unfortunately, there is no one set rule for the tax-deductibility of financial
advice. As discussed above, the deductibility of financial advice is dependent on the rules by which
state tax can be deducted for an expense in relation to the production of income.
Despite this, a lack of clarity remains. For many investors, their income comes from the product of
their investment. Therefore, several forms of financial advice would be considered tax-deductible.
Disappointingly, discrepancies from HMRC would suggest otherwise. The general rule of thumb is
that fees paid to professionals for investment advice are typically only deductible if the expenses
were incurred in the direct generation of income.
Below are some of the investments that are not considered producers of income. As such financial
advice services related to these activities are not tax-deductible.
For many companies, some of their largest investments are in properties, buildings, technology, or
equipment. Capital expenditures on assets such as these would include repair of an item, purchase
of capital, or expansion of existing investments.
Despite the end goal of many companies’ capital expenditure, the investment cannot directly be
related to the production of income. Therefore, it is not a tax-deductible investment. Advice on this
topic falls into the same category and as such, is also non-tax-deductible.
Managing and maintaining efficient cash flow is pivotal for the success of most companies globally. It
is important for companies to know their profits and losses and how to improve their margins. This
information could be their breaking point if not managed efficiently. This is why many businesses
choose to seek the guidance of a financial advisor. Their services can help to revolutionise the
running of the business and how the revenue is managed.
Unfortunately, in the eyes of HMRC, cash flow management is not related to the income of a business.
As such, any investments made into the time and services of financial advisors for the purpose of
cash flow are not tax-deductible.
What Advice is Tax-Deductible?
Due to the lack of clarity surrounding financial advice tax deductibility, it is not always obvious
whether or not you can claim certain expenses back from HMRC. In order for your financial advice to
be claimed back on a tax return, there would need to have been a direct relationship between the
outcome of advice on expenditure that leads to the production of income.
The clearest and most evident example of this action is the advice of a financial expert which leads to a
return on investment. This demonstrates clear income as a consequence of the advice. Regrettably,
tax returns don’t always tend to be this simple. Determining the outcome of advice can be far more
complicated. When working with a financial advisor, ensure that there is a breakdown of costs for
each service provided. This allows you to eliminate non-tax-deductible costs and ensures you can
claim any expenses which were directly related to the generation of income.
It is the hope of this article that investors can feel somewhat more confident in understanding the
deductibles of their tax returns. Financial advice can be pivotal to the running of a business but may
not always be related to the direct production of income. This can create complications. However,
by breaking down and assessing each factor by the tax return rules, you should be able to experience
a simple and successful tax deduction.
The key point to remember is that tax deductions can be made on investments that directly provide
an income. For any hesitations or doubts regarding this subject matter, it is important to consult
with your financial adviser before commencing any of their services. They should be able to inform
you of income-related advice and which of their services will and will not be tax-deductible.