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Claiming expenses is one of the main ways to reduce how much tax you pay. Whether you spent a fortune before you even opened for business, or you’ve been trading for a while and realised you’ve missed some expenses off your tax return – we’ll look into whether you’ll still be able to claim them as an expense.
The minute your business starts buying and selling goods – it’s trading. Anything you purchase from that point on, if used exclusively for your business, can be claimed as a business expense. This is then deducted from your income to reduce the amount of profits you need to pay tax on (meaning you’ll pay less in tax!).
Pre-trading expenses are basically any purchases you made before your business was set up. You’ve likely made these purchases in preparation for opening your business.
If you’re just finding out about pre-trading expenses, it’s important to note you can backdate claims for up to seven years before your business started trading.
The types of pre-trade expenses you can typically claim back might include:
HMRC are likely to approve any pre-trading expense that is wholly and exclusively used for your business, and something that would be classed as a regular expense had you been trading at the time.
Some purchases can’t be claimed as pre-trading expenses, such as:
You’ll treat any pre-trade expenses as though they were incurred on day one of trading. So, if you run a limited company you’ll include these costs on your first Company Tax Return, helping to reduce your Corporation Tax bill.
You can reclaim any VAT you incurred on goods you bought for your business up to four years before your VAT registration date as long as you still have the goods in your business (or up to 6 months prior for services).
This can be particularly helpful because a lot of new businesses don’t need to register for VAT straight away, but may be able to reclaim the VAT if they become registered at a later date.
You can usually make changes to your tax return, even if you’ve already filed it. Your bill will be updated, and you’ll be able to claim a refund (or pay more if you’ve had to change it for another reason). It’s worth noting you only have 12 months from the Self Assessment or Company Tax Return deadline to do this, either through your online tax account or by writing to HMRC.
Your deadline for your 2022/23 Self Assessment tax return was 31st January 2024. You have until 31st January 2025 to submit any amendments to it.
Keeping records is not just beneficial for your business, it’s a legal requirement. This process is known as bookkeeping, and it’s something you can either do yourself, or take care of by hiring a bookkeeper. It involves recording the day-to-day transactions of your business, as well as bank statements, invoices, and expenses such as mileage.
The world has changed since you could jot this information down in a notebook. Thanks to Making Tax Digital, you must keep digital records of your finances, such as on a spreadsheet, or with bookkeeping software like Pandle.
Learn more about our online accounting services for businesses. Call 020 3355 4047 to chat to the team, and get an instant online quote.
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It is unlikely you will need this service, unless you are voluntarily registered for VAT.
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You will receive our bookkeeping software Pandle for free, as part of your package.
You can use this to complete your own bookkeeping, or we can provide a quote to complete your bookkeeping for you.
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Call us on 020 3355 4047 if you’re not sure.