September 11, 2019 Last updated September 10th, 2019 130 Reads share

Simple Expenses If You Are Self-Employed

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How do simple expenses work for self-employed individuals

The Simplified expense system has been set up by HMRC to help busy self-employed individuals or business owners to reduce the inconvenience of time-consuming record keeping and data entry for their accounting and tax matters.

Keeping up with all the bookkeeping obligations can become very arduous, especially for self-employed individuals, as it requires regular updates of expenses and revenues. HMRC’s simplified expense regime can smooth the process and is able to make the overall process of determining expenses much less time-consuming.

What are simplified expenses?

Simplified expenses is a method of calculation, that provides business owners with an opportunity to determine their allowable expenses using a flat rate that is provided by HMRC, instead of calculating the actual business costs, which is quite complicated comparatively.

The alternative to simplified expenses would be to hire a competitive tax accountant.

Which business structures can use simplified expenses?

You may decide on using the simplified expenses if it actually goes with the structure of your business

  • Self-employed individuals working as sole-traders
  • Business partnerships that do not have a company as their partner on board

Expenses of Self-Employed

Which business structures can not use simplified expenses?

Business structures that cannot utilize simplified expenses include

  • Limited companies
  • Business partnerships that have a limited company as their partner on board

What type of expenses can be determined using the flat rates?

Flat rates can be utilized for

  • Determining costs for vehicles that may be used for business purposes.
  • Determining expenses that arise by working from home.
  • Determining expenses that arise by living on the premises of your business.

It is advisable that you work out all other expenses, by taking the actual business costs into your account.

Tax AccountantsAccountants or Business Accountants have been found to be extremely valuable in helping you determine which method to use and once identified how to use it.

What is the method of using simplified expenses

  1. Note down the miles that have been covered by the vehicle for business purposes, the hours dedicated to work from home and the number of people that live in the premises of your business, over a time period of about a year.
  2. Apply flat rates to the recordings made on the distance covered, hours dedicated and the number of people living to calculate your expenses.
  3. Add the expenses to the total expenses when completing your Self-assessment tax return.

Conduct a cross-analysis on what you are eligible to claim using simplified expenses with what you are eligible to claim when considering actual business costs, with the help of a simplified expense checker. This will be very clear in determining whether simplified expenses are suitable for the nature of your business or not.

It is always advisable to speak to an expert tax accountant before deciding to implement a certain scheme or time-saving strategy so they can see the impact on your financials compared to the time you save.

Thao Le

Thao Le

Thao Le is a Senior Accounting Manager at Clear House Accountants. Having worked and grown in the industry for a number of years she is now responsible for a team of accountants, tax planners and bookkeepers, working with them to help clients from a variety of industries, grow, save money and plan for the future. Thao holds a Bachelor and Masters degree in Accounting and Finance and is currently working towards her ACCA, she is also a Xero and Quickbooks Certified Advisor. Thao believes her expertise lies in high-level tax planning, management accounting and strategic business planning based on financial performance and business analytics. Her experience, expertise and knowledge make her an exceptional contributor at clear house towards various articles and research content.

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