Business Expenses?

[Gemma Rowlands]

Sorry for all the questions today but I'm trying hard to get things RIGHT, and you guys seem like a clever bunch!

Business expenses: what is, and what isn't? For example, I use my car to get to the office, but I also use it to socialise. How much can be claimed as a business expense, and how much can't? How would I begin to work this out? What about my mobile phone? And my internet connection? I couldn't do my job without it, yet I use it for lots of other things?

My head is a bit mashed with all of this!!

 

[Pete Brindle]

You need to work out how many miles it is to your office, how many times you make the journey each week, and how much that would cost you in fuel. As for the mobile phone, what percentage of the month is spent at work? I would say that could be the percentage that you claim for the phone. The internet is a bit more tricky, especially seeing as other people will be likely to use it, so I'll leave someone else to try and answer that one.

 

[Branded Merchandise]

Although my business sells promotional products, I'm actually a qualified chartered accountant. Unfortunately(well to be honest, very fortunately!) I didn't work in tax so I don't know the exact ins and outs but hopefully I can give you a rough idea:

First of all I assume you are a sole trader and complete an annual self assessment tax return? As opposed to being a Ltd company?

Cars:

First you need to work out the percentage business use of your car. I think you have to do this with a decent level of estimation. For eg by noting your mileage at the start of the year on your car and noting it at the end. Then subtracting mileage to and from work. Once you have figured out how many business miles you do, there are 2 ways to work out your expenses for the year

1) You can claim 45p per mile for the first 10,000 miles of business travel and 25p per mile thereafter. The 45p per mile is meant to be an all inclusive cost which covers petrol, car repairs and MOT throughout the year etc.

2)'The full cost method' which is basically your exact car expenditure in the year using receipts to calculate mileage and repair costs

Phone:

For the phone you are meant to claim only the business expenses. Best way to do it would be to take a months statement and make a rough guess of the percentage cost of calls that are business related

Broadband:

Similar to above, keep a log of how many hours you use broadband for work and use that ratio against the total broadband costs to come to your broadband allowable expenses figure

There's quite a few other things you can claim too, especially if you're working at home, for e.g a percentage of your household expenses.

Let me know if you have any other questions and I'll try to see if I can help

*Edit* This link may be of use http://www.hmrc.gov.uk/helpsheets/hs222.pdf#page=3
Page 6 - shows things you can expense and page 8 shows the car allowances discussed above

 

[Gemma Rowlands]

Although my business sells promotional products, I'm actually a qualified chartered accountant. Unfortunately(well to be honest, very fortunately!) I didn't work in tax so I don't know the exact ins and outs but hopefully I can give you a rough idea:

First of all I assume you are a sole trader and complete an annual self assessment tax return? As opposed to being a Ltd company?

Cars:

First you need to work out the percentage business use of your car. I think you have to do this with a decent level of estimation. For eg by noting your mileage at the start of the year on your car and noting it at the end. Then subtracting mileage to and from work. Once you have figured out how many business miles you do, there are 2 ways to work out your expenses for the year

1) You can claim 45p per mile for the first 10,000 miles of business travel and 25p per mile thereafter. The 45p per mile is meant to be an all inclusive cost which covers petrol, car repairs and MOT throughout the year etc.

2)'The full cost method' which is basically your exact car expenditure in the year using receipts to calculate mileage and repair costs

Phone:

For the phone you are meant to claim only the business expenses. Best way to do it would be to take a months statement and make a rough guess of the percentage cost of calls that are business related

Broadband:

Similar to above, keep a log of how many hours you use broadband for work and use that ratio against the total broadband costs to come to your broadband allowable expenses figure

There's quite a few other things you can claim too, especially if you're working at home, for e.g a percentage of your household expenses.

Let me know if you have any other questions and I'll try to see if I can help

*Edit* This link may be of use http://www.hmrc.gov.uk/helpsheets/hs222.pdf#page=3
Page 6 - shows things you can expense and page 8 shows the car allowances discussed above

Thank you very much that's incredibly helpful. I appreciate you taking the time to post the information for me! This should be useful for lots of other forum members, too!

 

[Pete Brindle]

Although my business sells promotional products, I'm actually a qualified chartered accountant. Unfortunately(well to be honest, very fortunately!) I didn't work in tax so I don't know the exact ins and outs but hopefully I can give you a rough idea:

First of all I assume you are a sole trader and complete an annual self assessment tax return? As opposed to being a Ltd company?

Cars:

First you need to work out the percentage business use of your car. I think you have to do this with a decent level of estimation. For eg by noting your mileage at the start of the year on your car and noting it at the end. Then subtracting mileage to and from work. Once you have figured out how many business miles you do, there are 2 ways to work out your expenses for the year

1) You can claim 45p per mile for the first 10,000 miles of business travel and 25p per mile thereafter. The 45p per mile is meant to be an all inclusive cost which covers petrol, car repairs and MOT throughout the year etc.

2)'The full cost method' which is basically your exact car expenditure in the year using receipts to calculate mileage and repair costs

Phone:

For the phone you are meant to claim only the business expenses. Best way to do it would be to take a months statement and make a rough guess of the percentage cost of calls that are business related

Broadband:

Similar to above, keep a log of how many hours you use broadband for work and use that ratio against the total broadband costs to come to your broadband allowable expenses figure

There's quite a few other things you can claim too, especially if you're working at home, for e.g a percentage of your household expenses.

Let me know if you have any other questions and I'll try to see if I can help

*Edit* This link may be of use http://www.hmrc.gov.uk/helpsheets/hs222.pdf#page=3
Page 6 - shows things you can expense and page 8 shows the car allowances discussed above

That link is great, I will pass it on to a few friends if you don't mind. I'll tell them where I got it from though!

 

[Branded Merchandise]

Not a problem Pete! The HMRC website is actually pretty decent. Whenever I am wondering about a tax query, I always have a search on there and tend to find a fairly good explanation or two.

Page 9 on the link is really useful, i.e how much you can expense if you work from home. You can also claim a portion of household expenses such as gas and electricity

 

[Pete Brindle]

Not a problem Pete! The HMRC website is actually pretty decent. Whenever I am wondering about a tax query, I always have a search on there and tend to find a fairly good explanation or two.

Page 9 on the link is really useful, i.e how much you can expense if you work from home. You can also claim a portion of household expenses such as gas and electricity

I'd never even thought about household bills but obviously it makes sense as you're using the house. Brilliant!

 

[Scottish Business Owner]

Some brilliant info on this post. You may not have noticed that @Jennie Stamp uploaded a small business expenses guide courtesy of Freeagent. The guide is free and pretty comprehensive.

It's on our resources section and the link is http://www.scottishbusinessforums.c...mall-business-expenses-costs.3546/#post-23377

 

[Jennie Stamp]

Some brilliant info on this post. You may not have noticed that @Jennie Stamp uploaded a small business expenses guide courtesy of Freeagent. The guide is free and pretty comprehensive.

It's on our resources section and the link is http://www.scottishbusinessforums.c...mall-business-expenses-costs.3546/#post-23377

Thanks! We have lots of other articles on FreeAgent.com around expenses as well. If anyone is after anything specific, just ask

 

[Gemma Rowlands]

I'd never even thought about household bills but obviously it makes sense as you're using the house. Brilliant!

Yeah, when I work from home I stay in one room (my office) which isn't used for anything else. So I know because of the size of the room and the hours of use exactly how much it costs to run the room. I've worked this out since posting this thread thanks to the helpful advice posted!

 

[Pete Brindle]

Yeah, when I work from home I stay in one room (my office) which isn't used for anything else. So I know because of the size of the room and the hours of use exactly how much it costs to run the room. I've worked this out since posting this thread thanks to the helpful advice posted!

So really, it could work out as being quite profitable working from home then. I guess you don't have to buy "work clothes" and there are no transport costs. What you earn, you keep?

 

[Gemma Rowlands]

So really, it could work out as being quite profitable working from home then. I guess you don't have to buy "work clothes" and there are no transport costs. What you earn, you keep?

It is profitable in many ways. I certainly notice the difference in travel expenses in weeks that I'm in the office in comparison to when I'm working from home. I know I can claim expenses back, but the money still needs to be put forward in the beginning and it can be hard to afford it sometimes.

 

[Jennie Stamp]

Hi Gemma, i thought you might also find our infographic 'Can I claim food and drink while travelling?' useful too.

I know what you mean with regards to your point about still needing to pay in the first place. I think it is important to claim for everything you can. We carried out some research a couple of years ago and found that at least a third of small business expenses are less than £10 - but most small business owners don’t even record them (read more here). So just make sure you remember to claim for the little things too

 

[Branded Merchandise]

Yeah that's a good point re claiming for little things. There's times I will buy stuff out of my own pocket for a couple of quid - quick stationery or whatever. I'm too lazy to expense it under the company. However I'm sure over a course of a year, it's worth taking the time to record them all!

 

[Gemma Rowlands]

Hi Gemma, i thought you might also find our infographic 'Can I claim food and drink while travelling?' useful too.

I know what you mean with regards to your point about still needing to pay in the first place. I think it is important to claim for everything you can. We carried out some research a couple of years ago and found that at least a third of small business expenses are less than £10 - but most small business owners don’t even record them (read more here). So just make sure you remember to claim for the little things too

That's a good point. Thanks . I'm always buying things like notebooks, pens etc from the supermarket just as a part of the weekly shop, not really thinking about it, but it probably does add up quite a lot over a whole year.

 

[Pete Brindle]

When I was self employed before running my current business I bought a lot out of my own pocket and just didn't think about claiming it back at all. Then when I got an accountant I was told to give her all of my receipts and she found that there was over £1,000 of receipts that I could have claimed for because they were genuine business expenses. So that made me think just how much I had wasted over the years. I won't be making that mistake again.

 

[Gemma Rowlands]

When I was self employed before running my current business I bought a lot out of my own pocket and just didn't think about claiming it back at all. Then when I got an accountant I was told to give her all of my receipts and she found that there was over £1,000 of receipts that I could have claimed for because they were genuine business expenses. So that made me think just how much I had wasted over the years. I won't be making that mistake again.

That's astonishing that it got to that level. Definitely makes you think. I will have to have a good think to make sure I'm not missing anything.

 

[Pete Brindle]

That's astonishing that it got to that level. Definitely makes you think. I will have to have a good think to make sure I'm not missing anything.

Write everything down as soon as you spend anything, that should help.

 

[Gemma Rowlands]

Write everything down as soon as you spend anything, that should help.

I have started doing that, I just need to remember to take my notepad with me everywhere now and I should be sorted! I have a new page for every month as well so everything's separate and can just go with the rest of my accounting stuff.