Business Expenses for the Self-Employed

Business Expenses for the Self-Employed: The Good, the Bad and the Claimable

Taxes have a nasty habit of eating into profits before you do. So unless you don’t mind spending more money than you need to, as a self-employed business owner, you will need to have an awareness of the importance of careful accounting and management of business expenses.

You will therefore also a need a strong understanding of allowable expenses and to be on top of your receipt management or else miss out on claiming back those overnight business trips in Barcelona, weekend Eurostar tickets and other all-important basics.

(Just note that entertaining and events are NOT considered tax deductible, so pause for thought before cracking open another Laurent-Perrier)

Allowable expenses are those costs that are considered by the tax authority to be essential to business practice (such as office rent, electricity and salaries), and as a result can be deducted from the business’s total revenue in order find out the taxable profit.

Claimable

The following types of cost can be claimed as allowable expenses:

Office and premises costs As well as rent, property insurance and utilities, these include insurance, stationary, cleaning and computers – although you can’t claim for the depreciation of equipment
Travel costs As well as fares, fuel and parking, also insurance, repair services, hotel rooms and meals
Staff costs Wages and salaries, bonuses and benefits, National Insurance and pensions
Clothing Such as uniforms and protective clothing
Marketing From flyers, advertising and free samples to website design, building, maintenance and photography
Legal costs Not just solicitors’ fees but also accounting and consulting fees, as well as bank charges – but not fines
Goods for resale Stock, raw materials to be processed and produced, and costs associated with production

Of course awareness is one thing, but managing your accounts, expenses and receipts is quite another. It is estimated that the average UK business person spends over £3000 a year travelling to meetings alone. That’s a lot of hours, fuel, meals and receipts – and, as a result, a lot of compiling, spreadsheets and time lost in order to make sure that your business is not being taxed unnecessarily.

But with the correct app to help you accurately manage those business expenses and VAT returns, a huge amount of time can be saved.

For more information on allowable expenses you may wish to visit: http://www.gov.uk/expenses-if-youre-self-employed/overview