What expenses can I claim as self-employed?

Question Mark

Now that you have registered as self-employed and your business is up and running, it is very important that you ensure you are keeping track of your sales and expenses.  However, it isn’t as straight forward as keeping track of all the money coming in and going out of the business.  You need to make sure that you are only claiming for those expenses that HMRC recognise as allowable expenses, as otherwise, you could end up with unexpected fines.

There is a lot of information out there about what expenses a self-employed person can claim through the business and the HMRC website does have a pretty comprehensive set of articles on this topic.  I wanted to be able to give business owners an overview of what can be claimed to get them started.  If you are unsure as to whether something can be claimed as an allowable business expense or not, contact HMRC or your accountant or bookkeeper.

For the most part, the majority of business expenses can be claimed on your self-assessment.  There may be some expenses that you enter into the accounts for accounting purposes but then need to discount for tax purposes – ie. Depreciation of assets, entertainment costs relating to clients/suppliers/customers or charitable donations.  The main thing you need to keep in mind is that the expense is “wholly and exclusively” for business use.

Some of the expenses are straightforward to deal with.  You simply enter them straight into your accounts as long as they are for the business.  They include:

  • Stationery
  • Printing costs
  • Postage
  • Advertising
  • Computer software
  • Business premises expenses: rent, utility bills, insurance
  • Staff costs: salaries, NI contributions, PAYE, pension contributions
  • Legal and professional costs: accountants, solicitors
  • Purchase of stock or raw materials and other associated costs
  • Business insurance
  • Membership to trade/professional bodies relevant to your business

There are then some types of expenses that aren’t as straight forward.

Travel:

While you can claim for business-related car/van costs like insurance, fuel and repairs – you would only be able to claim for the business portion and no personal use at all, so you would need to work out exactly what your business use is, which can be difficult to calculate.

Instead, you can use the simplified vehicle expenses from HMRC which is a flat rate per mile.  This would cover your costs for your vehicle.  If you use this method, you do need to keep using it until you have stopped using the vehicle.  In order to claim the fate rate, you will need to track your business mileage and have a record of it.

The current rates are (as of 06/04/2020):
Cars and Goods Vehicles (first 10,000 miles) £0.45p/mile
Cars and Goods Vehicles (over 10,000 miles) £0.25p/mile
Motorcycles £0.24p/mile

You can claim for all public transport costs – but only for the business portion, so if you take a journey that is not “wholly and exclusively” for business, you will need to separate out the business portion.

The same applies to hotels and meals.

It is very important to note that you cannot claim for travel between home and your main place of work.

Clothing:

There are very strict rules when it comes to claiming for clothing and this is down to the “wholly and exclusively” rule.  You can claim for uniforms, protective clothing needed for work, and costumes for actors or entertainers.  If the clothes are not branded with your logo or they could be worn outside of work, you cannot claim these costs on your self-assessment.

Use of Home:

The majority of sole traders work from home and therefore will want to be able to claim for a portion of the household bills.  The easiest way to do this is to use the simplified expenses that HMRC have set-up.  This method can only be used for those who work at least 25 hours or more a month from home.

Hours of business use/monthRate/month
25-50£10
51-100£18
101 and up£26
*these are the current rates provided by HMRC

The other method is more complicated and you would need to calculate out the proportion of business use for your home.

These methods only cover things like gas, electricity, mortgage and council tax.

Telephone and Internet:

There are quite strict rules when it comes to claiming for the telephone and internet use when you are self-employed and work from home.

If the telephone/mobile is used for both personal and business purposes, you can’t claim for line rental and can only claim for business calls if they are identifiable on the bill.  With the way phone packages work nowadays it can be quite difficult to prove what is a legitimate business expense.  A way around it would be to get a completely separate phone line for the business so you are able to claim 100% of the costs.

The same applies to the internet – you need to work out the proportion of the business use and only claim that percentage of the bill. One way is to work out how many hours per month you work from home.  Ie. Monday to Friday 9 am to 5 pm – so 8 hours a day, 5 days a week which is 40 hours/week and 160 hours/month (in a 4-week month).  There are 672 hours in a month, so the percentage of the internet bill you could claim would be 23.81%.

This is only a brief guide to help get you on-track.  If you are unsure about whether an expense is tax allowable, I would encourage you to speak to HMRC or your accountant/bookkeeper.

AutoEntry and Receipt Bank

As a small business owner, you know how precious your time is and it is often in short supply as you try to keep on top of sales, paying invoices, networking, advertising – and all the other aspects of running your business.

Finding ways to help make your processes more streamlined and efficient can play a big part in ensuring you can run your business smoothly and with as little stress as possible.

Maybe you’ve heard AutoEntry and Receipt Bank mentioned on a business forum you belong to, or your bookkeeper or accountant have suggested using them.

In this blog I am going to explain what they are and how they can help you.

What are AutoEntry and Receipt Bank?

AutoEntry and Receipt Bank are two pieces of software that can help automate the task of entering purchase invoices and receipts data into your accounting software.

They can make the whole process of entering invoices and receipts into your accounting software more streamlined and efficient.

How can they help make it easier to run your business?

There are many benefits to using this type of software:

  • frees up your time to focus on other tasks
  • your data is stored securely in the cloud so you don’t need to store paper copies
  • less chance of you losing those small receipts as you can take photos of them while you are out and about
  • helps you to meet the Making Tax Digital requirements by attaching images of the invoices to each transaction
  • verifies the accuracy of the data.

Will AutoEntry and Receipt Bank work with my current accounting software?

You can use AutoEntry and Receipt Bank with a number of different online accounts packages including QuickBooks, Xero, Sage, Kashflow and Free Agent.

You can find a complete list of packages on their websites: AutoEntry and Receipt Bank.

How much does AutoEntry and Receipt Bank cost?

When it comes to pricing – each software works in a different way.

AutoEntry:

Uses a credit system where you pay for a set number of credits per month (any credits you don’t use are rolled over for a 3-month period).

The number of credits used for each upload depends on the features used (ie 1 credit for invoices/bills/receipts, 2 credits for line items extracted, 3 credits for bank and credit card statements – per page).

If you run out of credits you can use up to twice the number of credits for your current subscription – you are then charged at the same rate and added onto the next month’s bundle.

You can have as many users as you need at no further cost.

A free trial period is available.

Costs start from as little as £9/month for 50 credits.

Receipt Bank:

You are allowed to submit the number of items per month as your plan allows.

There is a fair usage policy where you are given a bank of the number of items for a 3-month period – if you need to submit more items one month, you aren’t charged extra as long as you don’t go over the total items allowed in that period. (For example, if you are on the plan where you get 50 items/month, you would get a bank of 150 items/3-months – if one month you submit 75 items, month 2 you submit 25, and month 3 you submit 40 – as long as you don’t go over 150 items in total you won’t pay any extra).

You are prompted to update your subscription level based on how you regularly use the system (ie if you regularly submit more items than allowed).

Single User plans (suitable for a sole trader) starts from £9.99/month for 50 items/month.

Multi-User plans start from £20/month for 50 items/month – you can have as many profiles on the multi-user plans as needed.

A free trial is available.

For work at home busineses, I recommend AutoEntry.

I use AutoEntry with several of my bookkeeping clients in conjunction with QuickBooks Online.

I have used it for uploading and entering supplier invoices into the accounts, and it made the process of entering the data into the accounts much easier and efficient.

The clients can have the app on their phones, and they can easily snap photos of parking receipts, train tickets, or refreshment receipts while they are out and about meaning they don’t lose the paperwork and it’s all uploaded to the accounting software.

By having clients send supplier invoices straight to the dedicated e-mail address provided, we’ve cut out a step in the process and made it far more streamlined.

If you would like to talk to me about how I can help make your bookkeeping processes more streamlined, please don’t hesitate to contact me.

Making Tax Digital (MTD)

What is Making Tax Digital and how will it affect me?

Making Tax Digital – better known as MTD – is the Government’s plan to make it easier for individuals and businesses to know what tax they have to pay before the end of the tax year.

Eventually, all businesses regardless of size and industry will be required to submit monthly figures to HMRC.

This will need to be done on Making Tax Digital (MTD) compatible software. So, anyone still using cashbooks, Excel or desktop accounting software such as older versions of SAGE 50, will need to move onto compatible cloud-based accounting software.

How will Making Tax Digital (MTD) work?

Everyone will have their own digital tax account that they can log into and check to ensure all the information HMRC hold on them is up to date and correct. HMRC will then use this information to ensure that each person is receiving all the services they should be. The theory is that by the end of 2020, customers will be able to see all their tax liabilities and benefits in one place.

How will Making Tax Digital affect my bookkeeping?

All businesses will have to use a software that is compatible with HMRC’s MTD software to keep their accounts – like QuickBooks Online for example. The software will send the necessary information to HMRC using an API key. All transactions in a business will have to be recorded digitally as paper records will no longer be accepted as meeting the legal requirements.

When will I need to be ready for Making Tax Digital?

At this point in time, only VAT registered businesses with a turnover above the VAT threshold of £85,000 will need to be compliant as of April 2019 and they only need to file their VAT returns. Eventually, all businesses within the UK will be required to file all information – including self-assessments and corporation tax returns – with HMRC using MTD compliant software.

When will Making Tax Digital start?

making tax digital timeline

What should I do now?

As further information is released by HMRC we will update our clients so that they are able to be compliant in time.

Currently bookkeeping clients of Ihelm Enterprises are one step ahead as we only use QuickBooks Online to maintain accounts and the software is MTD compliant.

If you would like to discuss how we can help you with your accounts and become MTD compliant please contact us on info@ihelm-enterprises.co.uk or use the contact form.

The Awards Ceremony

We needed to attend the awards ceremony which was a black-tie event held in Birmingham at the MacDonald House Hotel. I had never attended a black-tie event before so of course I started to panic about what to wear, what would it be like, would I feel out of place.

I had a dress worn to a number of events previously and I had jewellery to bling and a lovely pair of shoes, so at least I was sorted on that end. Michael even got himself some spiffy new clothes. The day before, I had my nails done by Sarah from Glamourize, and I was going to have my hair and makeup done at the hotel. I don’t think we turned out too bad!

I was really nervous about going as I didn’t really know anyone apart from talking to them on the FB Group. I was worried I wouldn’t fit in or have anyone to talk. I was so wrong! Charlotte (The Bournemouth Wrap Girl) was the first person to speak to me – she recognised me from the group and she was so lovely and friendly – it really put me at ease. The girls who did my hair (Deborah from House of Hair) and makeup (Alexandra from A.B Beauty) were absolutely fab and helped me to gain even more confidence.

There was a drinks receiption to start the evening, which was quite daunting. I tried to remain as inconspicuous as possible which is no mean feat when in a wheelchair. We went to the seating plan and discovered the theme for the night was “Superheroes”. I was pleased to see that Charlotte was sitting at the same table.

On entering the function room – all I can say is wow! The decorations, the atmosphere – it was all so amazing. There were gift bags at each table and a special sweet treat from Belles Cakery – omg the brownies were absolutely delicious!! The host for the night – Dave – kicked things off and really put everyone at ease and in the mood for fun and celebration.

Throughout the night the awards were given out between courses and everyone was encouraged to get to know each other. A young woman named Carris spoke to us about brain tumours and how the charity, The Brain Tumour Charity, doesn’t get any government funding and she hoped we would help the charity out. It was a moving talk – you could have heard a pin drop in the room.

As the time got closer to the “Against All Odds” category, I could feel butterflies in my stomach and I was really anxious. I didn’t win – the judges found it really hard to choose as all of us in the category had overcome so much – but it doesn’t matter to me because I am a finalist. It was the first business awards I had ever entered and I’m so proud of what I achieved.

The night ended with a raffle and dancing. Michael and I both won a raffle prize. We didn’t stay for the dancing as I needed to take my medication and get some sleep.

I’ve come away from the awards with some new friends and even more determination. I know my business can work – there are tons of businesses out there of all sizes that need a bookkeeper – I just need to find a way to reach out to them. There are plans for Ihelm Enterprises and I am going to work hard to put them in place. There are also other business awards out there, just waiting for people to enter them – and now I have more confidence in myself and in what I do – I will be submitting more applications.

Don’t let tax ruin your business!

The thought of paying tax is unlikely to fill anyone’s heart with joy.

For most business owners, sorting out your year end accounts and tax return is a job that will always remain at the bottom of the to do list.

Here at Ihelm Enterprises, we have clients who fill shoeboxes with receipts. Others use plastic bags. On occasions, even the glove compartment of their car.

We’ve all lost the occasional receipt. Accidentally damaged them. Or had the ones where the print magically disappears over time.

Whatever filling system you use within your business, and no matter how successful or unsuccessful you think it is, the reality is that a pile of receipts will always be just a pile of receipts.

With cash flow being the main cause of business failure, we recommend turning that pile of invoices and receipts into the data that will help you to make better business decisions. Such as knowing what sales you make the most profit on. Identifying your best customers. Budgeting so you don’t overspend and put unnecessary pressure on your cash flow.

Keeping your bookkeeping up to date will not only get rid of the depressing piles of paperwork, it will also ensure that you get tax relief on every eligible business expense. It will also mean that you know what tax you should pay in advance, so you can be proactive and begin to put the money aside. Taking the stress away from that last minute panic to find the required funds.

At Ihelm Enterprises, we believe that bookkeeping should be pain-free and cost-effective. We work closely with our clients to ensure that they get a bookkeeping package that meets their individual requirements and more importantly, puts them back in control of their paperwork and cash flow.

Accountants in Chorley & Surrounding Areas

Are you an accountant in Chorley, Lancashire or the surrounding area? Have you got an influx of clients that require bookkeeping? If you have answered YES to either of these questions, we are here to help you!

Ihelm Enterprises has been providing bookkeeping services to small businesses and accountants for over 11 years. We work closely with all of our clients to ensure they receive a top-notch service. We have worked with local accountants to help them provide bookkeeping services to their clients. By outsourcing the day-to-day bookkeeping to us, you will free up your time to be able to provide an even better service to your customers. As their accountant, you will be able to focus on providing them with more focused tax & business advice.

We have several ways that we can get the necessary paperwork from you. It can be sent electronically via e-mail, Dropbox or secure server. We can also arrange to pick up paperwork from your office is you are in Chorley or within 6 miles.

We currently have 12 hours per month per client that we can offer to help you provide the best service possible to your clients, and so you can start growing your business.

Contact us now via our Contact Us page to find out more!