There’s a lot of paperwork when you run your own business, including capturing records of your work-related receipts. This spending on the running costs of your business can be can clamed as a business expense − if they’re classed as an “allowable expense” by HM Revenue and Customs (HMRC).
Common business expenses include:
- office costs, e.g. stationery or phone bills
- travel costs, e.g. fuel, parking, train or bus fares
- clothing expenses, e.g. work uniforms
- staff costs, e.g. salaries or subcontractor costs
- things you buy to sell on, e.g. stock or raw materials
- financial costs, e.g. insurance or bank charges
- costs of your business premises, e.g. heating, lighting, business rates
- advertising or marketing, e.g. website costs
Call HMRC’s self-assessment tax helpline if you’re unsuree whether a business cost is an allowable expense, or ask your accountant.
You deduct expenses from your turnover. That number will to calculate your taxable profit − the money you pay tax on.
Say, your turnover is £40,000, and you claim £10,000 in allowable expenses. You only pay tax on the remaining £30,000. This is the profit you pay tax on.
You don’t need to send in proof of expenses when you submit your tax return. But you should keep proof and records so you can show them to HM Revenue and Customs (HMRC) if asked. You must keep your records for at least five years after the 31 January submission deadline of the relevant tax year. HMRC may check your records to make sure you’re paying the right amount of tax.
Marie-Ann Capps, is a consultant and director at Bell Consultancy Essex Limited. The company, which is in Chelmsford, Essex, provides sales and marketing services for small and medium-sized businesses.
She has two QuickBooks accounts. One is for her personal tax/finances. The other is for her company, which she runs with her business partner.
“As long we keep on top of [expenses] it’s fine,” Capps says. “Because our QuickBooks account is connected to our bank as soon as the expense show up in the banking area we make sure that we scan in the document [the receipt], attach it, put it in the category, such as advertising or promotional, or signage, or ‘drawings’ if it’s wages.”
Receipt capture is half the battle. This is made easy by QuickBook’s mobile app, which lets customers use their mobile phone to take a picture of a receipt and upload it into their accounts.
Tracking expenses can help cut running costs. Capps uses QuickBook’s mobile app. The app has a receipt scanner, which scans or take pictures of receipts and attaches them to expenses.
HMRC accepts electronic scans of receipts, although it’s a good idea to keep a paper copy of each receipt.
“We can see where we are spending the most money and look at ways to make it more efficient,” Capps says. “Once we’ve had a year of being a limited company we will probably do an annual review of our costs. At the moment,, the main costs seem to be our wages and any sub-contractors that we bring in.”
We’re quite a lean business, anyway. We work from home and we had our own office equipment that we took into the business, just to start-up.”
- You can avoid using complex calculations to work out your business expenses by using simplified expenses. Simplified expenses are flat rates that can be used for vehicles, working from home and living on your business premises.
For more information, visit the Self-employed section of the QuiickBooks Resource Centre