As a solo entrepreneur, tracking and deducting business expenses is vital to paying the correct amount of tax each year and ensuring you get the full benefits available for your business.
However, if you have never tried to do this, tracking and deducting business expenses can seem like a minefield. It is understandable to be confused and uncertain. Let’s take a look at what you need to know to be able to keep on top of your expenses.
Understanding Business Expenses
So, the first thing that we need to do is take a look at business expenses and understand what they are before we can discuss any tips about tracking them.
In the case of most businesses, business expenses are simply costs that are associated with the running of the company. In the case of a solo entrepreneur, you will likely see these manifest as sole trader expenses, which are expenses you incur for running the business by yourself.
These expenses are important because you can use them to claim against the amount of money your business has generated, which brings down your tax liability.
Tracking and Deducting Expenses
Tracking business expenses isn’t difficult if you are committed to doing so. Any time you make a purchase directly associated with the business that is vital for that business to operate, you log it as a business expense. For example, buying new equipment like a laptop or computer for the business can be counted as a business expense, spending money on marketing and advertising is a business expense, and so on.
There is also a flat rate that any self-employed sole trader can claim for utilities if they work from home, but if you have an office, then this will not apply.
When it comes to deducting business expenses, you have to log all of them when you submit a self-assessment tax return each year. The expenses will then be taken off your profits, and your tax will be calculated based on this new figure.
Big Responsibility
The issue with trying to track and deduct your business expenses is that you are solely responsible for doing so and formatting it into a style which is easily understood is that you have to do all of this yourself. Furthermore, if you miscalculate what you can and cannot claim, you run the risk of being investigated by HMRC for attempted tax fraud.
Hire Experts
So, fundamentally, what we have established today is that when it comes to tracking and deducting business expenses, it’s definitely something you need to do, but the potential to get it wrong is quite high. Therefore, lots of people delegate this task to a bookkeeper instead. Bookkeepers are trained to offer support with tasks of this nature and would be happy to offer assistance to make sure you claim what you’re entitled to - it’s a big responsibility for some. Probookkeeper is happy to offer support and guidance in this area to ensure it is a smooth and easy process for any solo entrepreneur.
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