Your guide to knowing what expenses are taxable.

When carrying out your self-assessment, it’s hard to know what can be included as allowable expenses.

Contrary to popular belief, the government wants you to succeed in business and allows you to spend on certain items without paying taxes.

If you were in a muddle following your last self-assessment, our experts have compiled a list of items that may be included in your allowable expenses.

Types of tax-deductible items

In general, tax-deductible items will come under the following categories;

• Travel
• Office
• Stock
• Marketing
• Legal & Financial

Travel Costs

Any business-related car or van use may be allowed. Things such as;

• Vehicle insurance
• Fuel
• Hire charges
• Repairs
• Servicing and breakdown cover

You cannot claim these charges for general use, such as driving to and from work, but if your vehicle is genuinely used for work purposes, these allowances may be available for you.

It can be hard to calculate your use if your vehicle is used for both personal and business.

Under travel, you may also be able to claim for;

1. Train
2. Bus
3. Plane
4. Taxi
5. Hotel rooms
6. An evening meal during a business trip.

If you are taking a trip for personal and business, calculate how much is used for business and submit it as allowable expenses.

Office Costs

Many items can be listed under allowable expenses whether you work from premises or home.

It’s a little more complicated when you work from home, which we will explain later.

The types of things you can include are;

• Stationary
• Printing costs (including ink)
• Postage

You can claim for equipment such as computers, printers and software, but this may have to be claimed under your capital allowance if you don’t use cash basis accounting.

With regards to premises, the following may be allowed:

• Rent
• Maintenance & Repair
• Utility bills
• Property insurance & security.

If you work from home, you may be able to claim a proportion of your utility bills, but you need to calculate what proportion is used for business and what is used personally.

Stock Costs

Your allowable expenses for stock may include;

• Stock held
• Raw materials
• Costs incurred from producing goods

Marketing Costs

Most businesses need to budget for marketing costs and account for this when it comes to allowable expenses. They may cover the following;

• Newspaper adverts
• Directory listings
• Mailshots
• Free samples
• Website

You may also be able to claim for subscriptions.

An example of these would be:

• Membership to trade bodies or professional membership organisations
• Subscriptions to trade or professional journals

Legal & Financial Costs

Some fees are essential in business and still covered under allowable expenses.

For example:

• Accountancy fees
• Solicitor fees
• Bank, overdraft and credit card charges (If used for business)
• Interest on business loans
• HP interest and leasing payments
• Business insurance, such as Public Liability Insurance

Other items that may be covered are:

• Uniform or PPI
• Staffs salaries
• Bonuses
• Pension contributions
• Benefits
• Agency Fees
• Employer NI contributions.

This is an initial guide. More information can be found on the government website.

The most important thing to remember is that you will always need to prove these expenses, so remember to keep a record of all receipts and invoices.

Outsourcing your finances is an excellent option for small business owners who want to save time and money while ensuring accurate financial records.

When outsourcing bookkeeping for your small business, choose a reputable provider with a proven track record of success, like Rosemary Bookkeeping.

Through meetings scheduled at your discretion, receive 1-to-1 advice from a qualified professional who understands you, your business, and your community.

Take the hassle out of your business and give yourself the time to focus on what matters with your nearest Rosemary Bookkeeping business.

Call 0345 862 0072 to see how we can help you today.

Part of the government’s plan is ‘Making Tax Digital’, and by introducing this, it is set to make it easier and more simplistic for businesses to run properly. It will help them keep on top of their finances, and ensure they get their tax right the first time.

HMRC has a huge ambition to become one of the most digitally advanced tax administrators in the world. Underlying changes are being made through Making Tax Digital as the tax system will be working differently by transforming tax administration. It will help by making;

• It easier to file correct tax returns
• It more effective
• It more efficient

Making Tax Digital for VAT Registered Businesses

VAT-registered businesses with a taxable turnover will be required to use the Making Tax Digital service to digitally keep records and submit their VAT returns by using appropriate software from 1^st April 2019.

There will be a small minority of exceptions for VAT-registered businesses who have more complicated requirements. HMRC engaged with business owners and listen to any concerns they may have about their businesses being ready for Making Tax Digital. The decision has been made to delay mandation for them customers until 1^st October 2019.

Top MTD Facts

Fact 1

Some agents and businesses are providing updates and keeping digital records to HMRC as part of a ‘live pilot’ to develop the Making Tax Digital service for Income Tax. If you are either a landlord or a self-employed business, you are not required to use this service as yet, however, you can keep your business records digitally and send Income Tax updates to HMRC by voluntarily using software instead of filing a Self-Assessment tax return.

Fact 2

Most customers want to get their tax right but the latest tax gap figures reveal that too many are finding this hard. Digital records have improved the accuracy, and along with the support built into a lot of software products and the fact that information is forwarded directly to HMRC from the digital records; the amount of tax lost to these avoidable errors will be dramatically reduced.

Fact 3

One of the biggest concerns highlights to HMRC about MTD was about the pace in which this is implemented. In July 2017, the government announced that the pace of mandation would be slowed down and that Making Tax Digital will not be compulsory for taxes other than VAT, until at least April 2020.

In March 2019, the government then announced that they would focus on helping businesses to transform, and therefore will not be Making Tax Digital for any new businesses or taxes in 2020. The roll out date is yet to be confirmed.

It’s can be a worrying time but as a Bookkeeper, I feel, these changes are going to make it much easier for businesses to manage their information and finances.

If you would like to chat about how these changes could affect you, feel free to get in touch, contact your local Rosemary Bookkeeper today.

I often get asked this question. Afterall, most small businesses don’t want or need any extra expense in their business so, is it really necessary to outsource this particular task or would you be better off, doing it yourself?

The simple answer is, there is no simple answer. It really does depend on you, your time and your business activity.

The fact is, anyone can do their own bookkeeping. You can even purchase accounting software to make it easy for yourself, but that statement is key to making your decision.

The question really should be, is it easy for me to do my own bookkeeping?

In many cases, a sole trader or small business will start off doing their own bookkeeping and manage to keep on top of it. The problem is, when you start to get busier, time is precious, and you need to decide how productive it is to be spending your time sorting out your receipts and invoices rather than concentrating on the activities that drive your business.

We often find that it’s one of those tasks we put off. We will put it in the diary or set time aside every month, but something will come along that we simply must attend to. It’s about priorities and bookkeeping, more often than not, falls into that dreaded “to do list”.

This tends to cause a small business owner much more stress in the long run. All of a sudden, time will sneak up on you and suddenly, that small pile of receipts and invoices has developed in to a messy pile of paperwork that will take hours to sort out.

If you are super organised and know, without a shadow of a doubt that you can allow this time every month, in theory, you should be fine but if you are like the majority of business owners, you may find yourself in a chaotic mess at the end of the tax year.

Ultimately, it’s about productivity. Is it more productive for you to be working on the things that bring the money into your business or sorting out your paperwork? You need to decide what that’s worth to you.

If you spent the time working on your business instead of doing your own books, what would that translate to in monetary terms? If it’s likely to be more than the small fee you will pay a Bookkeeper then the answer to your question is yes, you probably do need a Bookkeeper.

My advice would be to talk to your local Bookkeeper. Perhaps it’s someone that you network with and you’ve built a relationship with. If they are anything like me, they will do a simple health check on your books for free and will give you a much better idea of whether this is something you need to invest in now, or if it can be out off until a later date.

Of course, I’m always on hand if you need any further help or advice. Neeta x

Outsourcing is actually a very realistic option for business owners so don’t be scared. If you’re still not sure, Rosemary Bookkeeping are more than happy to come and help you find out about making tax digital or just do a 1-2-1 health check with you and give you the opportunity to decide for yourself if you think you could benefit with no obligation, contact your local Rosemary Bookkeeper today.

This is a question I often get asked when I tell people what I do. Many people assume they are the same thing and I can understand why. The two terms are often used interchangeably. It can also be confusing because there are bookkeepers that provide accountancy services and accountants that provide bookkeeping services. Many business owners don’t realise that these are two separate roles and, quite significantly, priced differently.

To make a clearer distinction, I will explain what the differences are between a bookkeeper and an accountant and how each can help your business.

Bookkeeper

Bookkeeping is the recording of financial transactions, and is part of the process of accounting in business. Transactions include purchases, sales, receipts and payments by an individual person or a company. A bookkeeper will conduct this process.

HMRC also refers to bookkeeping as ‘record keeping’.

The theory is, behind every transaction on your business bank account, there is a piece of paper. The bookkeeper will process the paperwork and allocate or code them to appropriate ledgers – sales ledger, purchase ledger, general ledger. They are responsible for the day to day financial transactions of a business, making sure that the ledgers are balanced.

A bookkeeper will update a business’ books regularly, usually once a month. At the end of the financial year the bookkeeper will have brought the books to trial balance stage, at which point this will be sent to the accountant who will then use this information to produce financial statements.

A bookkeeper can perform other tasks such as raising invoices, payroll, credit control and VAT returns. As mentioned above, some bookkeepers will provide a full accountancy service.

Why should I use a bookkeeper?

Bookkeeping should be done little and often. Depending on the volume of paperwork involved, this can be done weekly, monthly or quarterly but more commonly it is done monthly. For a business owner that is running a business and doing many other things, bookkeeping tends to be one of those things that gets left behind as soon as you get busy. If this happens you should seriously consider getting yourself a bookkeeper. If you fall behind on keeping your books up to date, it can cause numerous problems.

A bookkeeper will keep your books up to date and ensure that if anything is missing it can be picked up straight away instead of at the end of the financial year. They will provide useful reports that help you keep track of your business performance, and will bring your attention to something that needs to be dealt with straight away. Generally speaking, bookkeepers are cheaper than an accountant.

Accountant

An accountant generally takes over where a bookkeeper leaves off. They will use the information provided by the bookkeeper and prepare adjusting entries to record expenses that have occurred but are not yet entered by the bookkeeper, for example if a supplier invoice hasn’t arrived on time prior to closing the books, or if wages in relation to the current month won’t be made until two weeks later, etc. Other adjustments to the accounts include the calculation and recording of depreciation. After making the adjusting entries, the accountant prepares the company’s financial statements, such as a profit & loss account, balance sheet, cashflow statement, etc.

An Accountant will also perform other tasks such as setting up a Limited Company, Tax returns, compliance, advice and business strategy. As mentioned above, some accountants will provide a bookkeeping service. In an accountancy practice an employed bookkeeper is likely to perform this task.

Accountants generally will have a professional qualification through an accounting body. Accountants will go though years of studying and training to obtain a qualification and they will be bound by code of ethics and subject to disciplinary procedures should they breach their professional membership conditions.

Why should I use an accountant?

Regardless of the size of your business, and unless you are an expert in tax or finances, you should get yourself an accountant. They will provide your business with a great deal of essential support. You can seek help with budgeting and forecasting cashflow from an accountant as well as credit control and just general financial advice. They can offer you up-to-date information on any general or legal enquiries.

Professional accountants understand the nuances of dealing with the tax authorities, the correct format to submit information to HMRC, and are generally for more able to deal with tax enquiries should they arise. If you need advice on anything from the expenses you can offset against Corporation Tax, or whether or not you have enough retained profit to declare a dividend legally, an accountant would be able to answer these queries with ease. Taxation is a large business expense and an accountant can effectively minimise these costs.

The distinction between accountant and bookkeeper keeps changing as accounting software and other software evolves. For many years, companies used the title of accounting clerks for employees doing the tasks formerly performed by bookkeepers. The accounting clerks are usually supervised by an accountant.

Remember both are professional roles in their own way.  If you looking to employ or outsource you should be looking for someone with a suitable qualification or experience. Bookkeepers and accountants can be certified through professional bodies. Make sure you seek someone that can explain accounting jargon in plain English!

Rosemary Bookkeeping provide an outsourced bookkeeping service for small and medium sized businesses. If you would like more information about outsourcing your bookkeeping, contact Neeta Patel:

Tel: 01604 422314
Email neetapatel@rosemarybooks.co.uk

Should I employ an in-house bookkeeper or outsource the work?

 Congratulations! You have a successful business and have seen significant growth and healthy profits from all your hard work. You worked those long hours, perhaps over the weekends, sacrificing family time and even some ‘You’ time in order to achieve your dream of running your own business. It wasn’t easy, but you did it!

You’ve since taken on some staff to help you because let’s face it you can’t do everything on your own.  They are experienced and help you meet your targets. You are a business owner and you have numerous things you need to juggle.

So far you have managed to do the bookkeeping yourself, but now you need to focus on sustaining your business growth and let your staff do what they are good at, therefore you need to get someone else to do the books.

So, should you employ a bookkeeper or could you outsource the work? Let’s look at the factors to consider for both: –

Employ a bookkeeper
You could argue that you already have employees so what difference does it make to have another one? True, but you would have to employ some staff with specific skills depending on the nature of your business. For example, if you run an IT business, a catering business, a garage, a lettings company, and so on, you need to employ experienced staff to work to your standards, following your rules and guidelines because that’s what makes your business the success it is. Also, some business processes are more easily outsourced than others. Activities like Bookkeeping and Accounting, Sales and Marketing, Human Relations and Office Cleaning are easily primed for outsourcing and are more cost effective than employing someone in house to do these tasks.

If you decide to employ a bookkeeper you need to consider the cost implication of keeping an employee – financial and non-financial. You’ll need to provide appropriate working space and most likely would have to provide some training. But what if you have no idea how to train someone how to do bookkeeping correctly?

Keeping the bookkeeping in-house means all the paperwork remains in-house and you have instant access to any document you may need. But with the advances in technology these days this is not really an issue.

Outsource bookkeeping
There are a number of benefits with outsourcing bookkeeping as ultimately it allows for the most flexibility.

If an employee falls ill you’ll still have to pay them, unlike outsourcing where you don’t bother about such commitments. If the employee goes on holiday, you’ll have to pay them and also look for someone to do the job during this period of absence. But if you outsource this job, you won’t have to bother about such costs.

One problem with having an in-house person is that it may require specialised software and equipment. Using an outsourced bookkeeper means you do not need to provide them with this because they already have it, cutting costs.

Another issue with an in-house bookkeeper is that it may be hard to keep up if your business grows. This could result in having to bring in more employees, thus having to train them, show the new system and so forth. With an outsourced bookkeeper, they are more likely to be able to adapt to your needs.

Entrepreneurs have long seen outsourcing as a strategy reserved for big business, but technology has made it a more accessible tool for small businesses – and for some small firms, outsourcing has made a powerful impact on their growth, productivity and bottom lines.

Summary
The decision whether to employ or outsource rests squarely on your shoulders. It’s an important decision you’ll have to make. As a business owner, you’ll decide on what suits your circumstance and the type of business you run.

Whatever you decide, make sure your bookkeeper is experienced and qualified. A good bookkeeper will ensure your business records are kept up to date to keep you track of your business performance.

If you are looking to outsource your bookkeeping, contact Neeta Patel at Rosemary Bookkeeping:
Tel: 01604 422314
Email neetapatel@rosemarybooks.co.uk