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The Micro Business Guide To Expenses

Updated: Mar 18, 2021

The new tax year is coming up and for a lot of businesses, the start of their new financial year so now is a good time for change and getting in control of your business finances. Knowing your filing dates and deadlines and understanding a few key accounting and tax basics will make you feel more in control.

TOP TIP Put your key accounting dates in your diary in advance or on a wall planner so that you know the dates you are working to.

Sole Traders & Partnerships

  • The accounting year end date that falls in the tax year 5th April 2020 (06/04/19 to 05/04/20) will form the basis of your tax return for 2020.

  • For example: accounts that have a Year End date of 05/04/20, Year End 30/04/19 or Year End 30/09/19 would go on your 2020 tax return.

  • The filing date for 5th April 2020 tax return is 31st January 2021. Any tax due for this tax return will normally be paid on account (in other words an estimate) by 31st January 2020 and 31st July 2020 with any balancing payment on 31st January 2021.

Limited Companies and Limited Liability Partnerships

  • The filing date is 9 months after your year end with Companies House. For example: Year Ending 31st March 2020, the filing date is 31st December 2020. Any corporation tax that is due following the tax return is due no later than 9 months and a day after the year end.

TOP TIP File your tax return as early as you can so you have as much advance warning as possible for paying any tax owing.

Maintaining Records

  • Make sure you keep your accounting records up to date. If they are kept up to date it is much easier for you and it won’t be as stressful as having to do them all in one go. Keeping on top of your records regularly will also make it harder for you to miss any expenses and you want to be able to offset all expenses against your profits, to keep more of the money you earn!

  • Use separate bank accounts for business and private purposes, as it makes it easier for whoever is preparing the records and accounts.

TOP TIP The better organised and more straight forward your accounts are, the cheaper your accountancy fees will be!

Type Of Records

Manual cashbook: our advice would be to move away from using this method if you still are.

Excel spreadsheets: sufficient for a lot of micro businesses.

Computer packages: most recognised Sage, Xero (cloud based), but there are lots of others. Using a computerised or online accounting package will also provide you with excellent management information and allow you to know exactly where your accounts are at any point of the financial year.

TOP TIP You should keep your records for 7 years; in case you have an enquiry from HMRC.

Business Expenses

Think about business / private split

  • Pre-trading expenses (setup costs) can be included in first period of accounts

  • Office costs: phone (separate landline for business), internet, stationery, printing

  • Clothing costs: uniform, protective clothing, (not everyday clothing)

  • Insurance and subscriptions: Public Liability insurance, recognised body relating to business

  • Bank charges, credit card charges, annual arrangement fees

  • Motor expenses: mileage allowance plus car parking or business % of all motor expenses

  • Use of home: monthly allowance - 25-50 hours per month £10, 51-100 hours per month £18, 101 hours or more £26 or % of running costs

  • Subsistence: can claim if away for more than 5 hours

  • Hotels: business trip necessitates overnight stay

Disallowable Expenses

Accounting profit and taxable profit are different! Wholly and exclusively for the purposes of the business

  • Private drawings (wages allowable for limited companies)

  • Goods for private use

  • Proportion of land line, mobile, internet if used for business and private

  • Entertaining clients, suppliers, customers

  • Loan repayments (only interest)

  • Business gifts (treated as entertaining)

  • Donations (could be allowable if say receive advertising as long as cost is proportionate to the benefit of advertising received)

  • Fines and penalties (motor fine, late filing penalty)

HMRC Can Be Helpful!

HM Revenue & Customs website is full of useful information.

You can sign up to HMRC business advice emails.

They have online training on their website.

The guidance is not all too technical so well worth a look.

The notes in this blog are for general guidance. For specific queries relating to your business affairs, check with your accountant. If you do not have an accountant and you would like to find out more about the services that Cube Accounting provide, get in touch for a chat or to arrange an appointment.

Office: 01788 815 017 Email:

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