What happens if you don’t keep records?
Claiming actual business expenses is a legitimate way to lower owed taxes – you’re spending money for your business, which makes its costs higher. But claiming imaginary expenses – ones where you didn’t actually spend the money you say you did – is tax avoidance, so never do it. And if HMRC ever find that you aren’t keeping records and receipts, they’ll think you’re avoiding tax, even if they are legitimate expenses. It’s also worth noting that you’ll need to keep your paperwork for at least the previous five business years.
What expenses can you claim?
We’ve listed some of the costs you can claim as expenses below. It’s just a quick overview – it’s still a good idea to get the advice of an accountant. You are allowed to claim any equipment as expensive, as long as it is required for an actual contract, either one you are currently working on, or one which you are about to start working on. If it’s equipment you buy for a potential future job, it’s a non-allowable expense. So, if you’re an IT contractor looking to buy Photoshop because you think you might be able to get some graphic design work, it’s not an allowable expense.