Tracking Business Expenses: How it Can Help Reduce the Amount of Tax You Owe
Operating a business can be a costly endeavor and penny-pinching makes all the difference when entrepreneurs are getting by on tiny margins and battling for market share. It can be even costlier if your company is paying more taxes than you actually owe. According to an article published by the accountancy firm UHY, UK businesses overpaid £9bn in corporation tax in 2019. In this blog, we will detail two ways how proper expenses tracking can reduce the amount of tax your business is required to pay to HMRC.
1) Digital receipt tracking
Receipts create a financial summary of how you spent your funds throughout the financial year. Numerous receipts will be for goods and services that are tax deductible, allowing you to offset taxable income. Your business structure will determine the specific deductions permissible to take for that specific structure, plus you are entitled to deductions that cover all business structures. Keeping your receipts for a whole year can be a battle so a receipt tracking software is advised to make sure that even if your receipts are misplaced or lost, you will still have everything you require in the form of a digital copy.
2) Record business trip expenses
You are able to claim expenses incurred from business trips being that they are within reason. These can include overnight accommodation, uniform and equipment, public transport costs, food and drink, parking fees, congestion charges and tolls. It is extremely easy from the moment to moment nature of business trips to loose or misplace your receipts on the move. If your company requires your employees to travel a lot for business, then making sure the receipts are properly collated is paramount to be able to deduct the expenses from your tax bill. Getting your employees to use an expense tracking app on their smartphones ensures that they can keep track of each purchase as they make it and that the expense is automatically uploaded to the cloud.
Tracking business expenses is an important aspect of bookkeeping that should never be overlooked. Not only are you able to efficiently see how much your company are set to save via deductibles, but if god forbid your company is ever under investigation by the HMRC you will have every expense scrutinised. So making sure you have evidence of all expenses claimed will help you rest a little easier.