A business expense is a cost incurred by a business in the course of its operations. These expenses are necessary and ordinary expenses that are typically deductible for tax purposes. Examples of common business expenses include:
- Rent or lease payments for office space, equipment, or vehicles
- Salaries, wages, and benefits for employees
- Office supplies, equipment, and software
- Advertising and marketing expenses
- Travel and entertainment expenses
- Insurance premiums
- Interest on business loans
- Licenses, and fees
- Professional fees, such as legal and accounting fees.
If you’re self-employed, then HMRC requires you to keep hold of your business’s receipts as part of your business records, although you don’t have to include the receipts themselves when you file your tax return.
You’ll need to keep the receipt for anything you expect to reclaim as an ‘allowable expense’ (see below) when filing your tax return. If you prefer, you can just keep a digital copy of the receipt to save you rummaging through your paperwork later – although make sure you capture all of the key information on the receipt when scanning it.
You should also keep records for any capital assets you have purchased, for as long as you have the asset and for at least six years after you sell it.
Keeping these records is not only a requirement from HMRC, but will help you fill in your tax return accurately and will be vital if you ever need to show your accounts to a tax inspector. If you’re unsure about what records you should be keeping for your business, your accountant should be able to help.