What are the main expenses I can claim and how do I record these?
Every business will have expenses in the line of carrying out their work. If you claim on them, you can offset the amount of tax you have to pay come Self Assessment time. This sounds great but can often lead people to overclaim in order to lower their tax bill.
The real trick is to be sensible and fair with what you’re trying to claim for. You don’t want to fall foul of the taxman and end up having to pay back taxes or worse.
Familiarise yourself with the following guidelines on what you’re entitled to claim. If you’re ever unsure, just get in touch with us - we’re here to help you.
What can I claim?
Your business will naturally incur running costs - these can be deducted from profits provided they are allowable business expenses. Be careful you only claim on legitimate items. According to HMRC, expenses must be ‘wholly and exclusively’ for business use.
You can claim the majority of costs that are directly related to your business. Here are some of the most commonly claimed expenses:
Travel costs - If it’s for mixed purposes, you should claim for the business percentage only. Check out our more in-depth article here.
Food - If you’re working from home or at your regular place of work, you aren’t able to claim. If you’re out visiting a client at their site then this can be claimed and you will receive tax relief. Check out our more in-depth article here.
Motor vehicle costs - You have two options here, claiming the full cost or using a mileage-based method. For many, claiming mileage only is easier to manage. Check out our more in-depth article here.
Accountancy costs - You’re paying us to help run your business, make sure you claim for the costs.
Legal costs relating to your business - You can’t use your business funds to pay for personal matters. Additionally, your business can’t claim relief if you’ve broken the law.
Advertising or marketing costs - These are perfectly fine to claim for, just be sure it’s not more akin to ‘entertaining’, such as taking a client out to lunch.
Phone and internet costs - If in the business name, you can claim all costs. However, if they’re personal you can only claim a reasonable percentage of the costs. For example, if your personal monthly mobile phone bill is £50 and you only use your phone 50% of the time for business use, you can only claim for £25 as an expense.
Equipment - If it’s purely for the business then you’ll be able to claim 100% costs. If you know that you’re going to be using the item for some personal use (think of a home PC for example), then you will need to apportion the costs accordingly. If you’re buying secondhand items or transferring personally purchased items into your business, just get in touch and we can advise you what to do.
Rent and Use of Home - These are two completely separate categories for expense claims. Rent refers to a rented office space for your business - you can’t use it for your personal accommodation needs. Use of Home is when you work from home, meaning you have two options when claiming for certain costs: Flat Rate or Analysing Costs. Check out our more in-depth article here.
Insurance - If it’s business related (such as Employers Liability, Professional Indemnity or Public Liability), then these can be claimed. Private Medical is considered an employee perk, so you can’t offset this against your profits.
Postage and stationery - You can claim for all business related costs.
Bank charges - If you have your bank account in your business’ name (which you should do), you can claim for the costs. Personal fees on your account are just that, meaning they can’t be claimed.
The thing with claiming expenses is that if they only partly relate to your business you will need to allocate the amount you claim for based on the business use.
How do I log these in the software?
The Freeagent software available as part of your Crunch Sole Trader package, separates expenses into three categories: Expenses, Bills and Bank Payments.Expenses - If you’ve paid for an item on behalf of your company (otherwise known as an ‘out of pocket expense’) you should enter this as an expense.
Bills - These are items or services that you’ve already received, but don’t have to pay for right away (i.e you’ve been invoiced for an item, but have 30 days to pay.). These should be entered as Bills and must be paid from your business account, not your personal funds.
Bank Payments - These are purchases made from your business account and can be recorded manually or directly off your bank statement (providing you’ve uploaded a statement or enabled your bank feed).
When entering any purchase, you’ll need to try to find an appropriate category that fits. The category list is extensive but if you’re ever unsure, just get in touch with us via email@example.com.