Working as a sole trader sure gives you a lot to think about and focus on. It can get confusing very easily when it comes to the financial side of your business and sometimes you need a little navigation through it all. Many sole traders miss out on the most common allowable expenses that they can claim back on, and many times it falls into not keeping receipts and records of all of your expenses.
What are Allowable Expenses?
Allowable expenses are the items that you have spent money on for the benefit of your business that you can claim tax relief on and offset against any profit that you make in your business.
Usually referred to as tax-deductible items because they are deducted from your income before calculating your tax payments. There are some things you can claim on, and others you cannot. As a business owner, it is recommended you record all of your expenses whether you think of claiming back tax relief on them or not, as they ultimately are a cost on your business.
Typically your claimable costs fall into office and premises costs, travel, staff, stock, and professional fees including marketing, advertising and training.
Breaking Down the Records
This will involve compiling a lot of receipts and it is always helpful to stay on top of them by recording them with either a logbook or software where receipts can be photographed and uploaded.
In the realm of office and premises costs, there are plenty of areas that are classed as tax-deductible expenses. General costs are associated with stationery, postage costs, printing, purchases of software and licences and the bills associated with the phone, mobile and internet. The running costs include rent for business premises, business rates, water rates, gas and electricity bills – as well as property insurance and security costs.
If you work from home, you can calculate exact costs relating to the space (where you can only claim a percentage of bills based on how long and how you use the space for work) or you can claim simplified costs (which are a set rate HMRC come up with every year based on how many hours you work each week).
Travel becomes a big area when running as a sole trader, especially if your vehicle is used for business purposes. This means that your fuel expenses, insurance and parking fees fall into deductible expenses. If you use a train, taxi or even have to book a hotel on a business trip, that also falls into deductible expenses.
There are many different types of expenditure that require recording around these areas and others, and keeping on top of them is a somewhat complex part of running the business. This is why sole traders call on the expertise of bookkeeping services to help them accurately identify and file all business expenses, as well as balance their books for their business to grow.
Contact the team at pebbles for bookkeeping services in Manchester to always be in control of your allowable expenses.