With the new tax year this April 2023 comes new hope. Despite the difficulties of the Winter cost of living crisis, more and more people are taking the leap and becoming their own boss.
But with this new hope of freedom and high expectations also comes doubt - just how do you run your own business? How will you find the cash to pay for that new laptop? What are all these different tax rules that you didn't have to think about before? Hubu Accountants in Wales addresses the most asked question from new sole trader clients - what counts as a business expense?
Once you have registered as self employed, the first step is to talk to an Accountant, who can help you with the process of setting up your digital bookkeeping software account, and understanding what you are entitled to earn before you start to pay tax, and what counts as a business expense.
Business expenses range from travel, to office expenses and food. These expense costs are removed from your 'profits'. For instance, if your business revenue is £25,000 at the end of the year, but you spent £10,000 on expenses, your profit (which is your taxable amount) would only be £15,000.
Travel expenses can include paying yourself mileage at 45p per mile if you travel to a meeting, or the cost of a train ticket to attend a conference or seminar related to your business services. It can also include the cost of accommodation if you need to spend more than one day at an event.
Office expenses can include everything from your business related bills such as the internet or phone, to stationary and equipment costs such as a new laptop or work mobile. Remember, if you rent a unit this may also have a separate office within it, so as well as inputting your rent and business rates within your expense list on Quickbooks for instance, you should include these office costs as separate expenses.
Food expenses can include a coffee at the local cafe, to a meal that you have covered at a hotel when wining and dining your potential future business clients - if that's what it takes to win you a deal, that's a business expense! However, it's a good idea to keep these kinds of expenses to a minimum if you can - remember, too many expenses can devalue your business, and will effect cash flow down the line.
The first year of self employment may be harder than you thought, so it's a good idea to check if you are entitled to any help for self employed people in the UK, as there are benefits available for self employed people - you can check the .gov website for more information.