More people than ever are turning to self-employment and while there are certainly many advantages to being your own boss, it’s safe to say that reviewing expenses isn’t one of them.
However, although it can be a time-consuming process, managing your expenses properly can save you a significant amount of money and doesn’t need to be a headache. Here are our top tips for getting started:
Evidence is key when it comes to expenses and although you don’t need to send proof of your expenses to HMRC when you submit your tax return, they can ask for evidence of the purchase at any time.
Having a robust filing system to store all receipts can make your life a lot easier in the long run and it’s worth checking at the end of each month that you’ve retained everything you might need in the future.
Do your research
The best advice when it comes to expenses is to do your homework and work out what you are entitled to.
Allowable expenses cover office costs like stationery and phone bills, rent you pay on an office and property insurance, as well as advertising and website costs – generally the costs you incur to run your business.
If you work from home, you may also be able to claim a proportion of costs on some of your utility bills although you will need to carefully work out exactly how much is covered.
For a full list, it’s worth visiting HMRC’s website to make sure you’re up to date on what counts as an expense and what isn’t included.
Timing is key
If you’re self-employed, claiming expenses is all down to you – and if you miss the deadline you could be missing out on money you’ve already earmarked for something else.
There’s no excuse not to be ready for the personal tax return deadline and it’s important to make sure you aren’t rushing the night before the due date as there’s a good chance you’ll need to track down something vital that you’ve mislaid.
For the last tax year (ending 5 April 2018), paper tax returns are due by 31st October 2018, while the online deadline is 31st January 2019.
Check out the simplified expenses scheme
A less time-consuming way to manage your expenses could be by taking advantage of the government’s simplified expenses scheme, which uses flat rates instead of working out your actual business costs.
However, it only applies to business costs for vehicles, working from home and living in your business premises, and the actual costs for all other expenses must be worked out as normal.
It’s definitely worth using the government’s simplified expenses checker to assess whether it’s something that would work for your own business.
Seek expert advice
Getting to grips with your expenses and what you need to claim can certainly be a bit of a minefield and another thing to worry about when going self-employed.
If you’ve got any doubts about what you’re doing, seek external help from a small business accountant who will be well-versed in these matters.
Although it’s an initial expense, there’s a good chance they will save you a significant amount of money, so it can be a real asset to have someone with that extra experience on your side.
Getting to grips with your expenses can seem daunting but it shouldn’t be enough to put you off going self-employed. As long as you stay organised throughout the year and seek advice should you need it, dealing with your finances won’t take up too much of your time and you can invest your energy into the real running of the business.