Records you need to keep
Business expenditure Business expenditure is the day-to-day cost of running your business, commonly referred to as running costs. Generally, they are costs you pay for the sole purpose of earning business profits. You must keep records of all costs so that you can justify your spending. Let’s find out about the most common types of expenditure that you can claim as allowable expenses. We will start with an expense that is common to most businesses – vehicle running costs. If you use your car or van for business you can claim the cost of any business journeys. You can work out the allowable business expenses by using one of two methods:
Wages, salary and other staff costs. If your business grows and you take on staff you can claim the cost of their wages, salary, commission, bonuses and employer’s National Insurance as allowable expenditure. However, you can not include any money that you take from the business for personal use, such as your own drawings or the cost of your own National Insurance. These are private expenses and therefore not allowable. Rent, rates, power and insurance costs. If you have business premises, you can claim what you pay for rent, business rates, water rates, light, heat, power and any other business costs associated with those premises. Many self-employed people do not have separate business premises and run their business from home. You can claim a proportion of your utility bills based on the size of your home and how frequently you use it for business. Utility bills include heating, lighting and council tax. You must keep copies of your utility bills so that you can work out how much to claim for business use. Repairs and renewals of property and equipment. You can claim the cost of repairs and any maintenance of your business premises. However, improvements are not allowable, only like for like repairs. Any repairs to parts of the premises that are not used for business are not allowable. You can also claim the cost of repairing business equipment and replacing small tools. Accountancy, legal and professional fees. You may choose to use an accountant or bookkeeper to prepare your businesses accounts and complete your tax return, but HMRC do not say that you have to. The cost of using a professional such as an bookkeeper or accountant, is an allowable business expense, as are other professional fees, such as professional indemnity and public liability insurance. Public liability Insurance covers a business for damages and compensation in the event of injury or death to a member of the public, or damage caused to their property. Indemnity insurance protects a business against any claims arising from bad or negligent advice or services. Telephone, fax, stationery and other office costs. Telephone, stationery, postage, computer running costs and internet charges are all allowable expenses. If you use a telephone privately as well as for business, you must keep a record of business and private calls. Only business calls can be claimed, you cannot claim for private calls. You can use itemised bills to work out the business use. You can also use the itemised bills to claim a proportion of the line rental. These rules apply to mobile phones as well as landlines. Money spent on an internet connection (including broadband and wireless broadband) is allowable if you use the connection solely for business purposes. Where there is ‘mixed’ (business/non-business) use, follow the approach used for telephone rentals. Keep a record of total telephone and internet costs so that you can work out the amount spent in relation to your business.