Accounting for Bloggers: What expenses are tax deductible?

Last week in the BritMums Accounting for Bloggers series, Georgi Rollings of Starfish Accounting introduced the series with Blogging: Trade or Hobby? and today she shares tips on expenses…

So you’ve decided that your blog is a trade, and you’ve registered with HM Revenue & Customs as self-employed.  You will have to pay tax on any profits that you make which push your total income above the personal allowance (£7,475 for the 2011-12 tax year).  What expenses can you deduct from your blogging income to calculate your profit?

Allowable expenses

An expense is allowable if it is “wholly and exclusively” incurred for the purposes of your trade – in this case blogging.  Examples of tax deductible expenses include:

• Telephone:  both mobile and landline.  Track your calls over a period to identify what percentage of your calls are business related, and then use that percentage to calculate the allowable expense;
• Broadband:  track the family usage of broadband over a period to come up with a proportion of business vs. personal use, and again use that proportion to calculate the allowable expense;
• Website costs:  any costs to develop or maintain your website can be considered, including web hosting and domain registration.  However website design and development costs are treated differently.  These are viewed as “capital” spend, and should be deducted through using capital allowances (see below);
• Membership fees / subscriptions;
• Professional fees e.g. lawyers’ and accountants’ fees are all tax deductible;
• Conferences and associated travel;
• Marketing costs including advertising of your blog, printing business cards, etc.
• Working from home – see the next blog in this series!

Expenses which are not tax deductible

Some expenses are not tax deductible even though you might expect them to be.  Things to watch out for include:

• Childcare – even if you have to pay for childcare in order to attend a conference, this is NOT an allowable expense;
• Entertaining;
• Subsistence costs, e.g. lunch, coffee.  The exception to this is if you are staying somewhere overnight where you can then deduct “reasonable” expenses for breakfast and evening meal.

Capital allowances

If you spend money on something which will last for at least a couple of years such as website development costs, a laptop, or a printer, then you need to track these separately as you can’t just include these as expenses on your self assessment tax return.  You would claim capital allowances instead.

Unless you are spending a huge amount of money (over £100,000, or over £25,000 from 6 April 2012), you should be able to claim the whole cost in the year that you buy the asset.  The capital allowance you would use is the Annual Investment Allowance, which is a separate box on your tax return.  Make sure you only claim the business use – e.g. if you also use your laptop for personal emails, internet shopping, etc. you need to figure out what percentage of your usage is business related.

What records do I need to keep?

Make sure you keep all invoices and receipts.  It’s easier if you file them in a different folder or envelope for each month.  Track everything in a spreadsheet, or book.  And don’t leave it all until the end of the year!  You have to keep everything for at least 6 years, although it’s acceptable to keep most things in electronic format so if you want to scan your receipts to save you some space then that’s acceptable.

And remember, the more allowable expenses you manage to keep track of, the lower your taxable profits, and the less tax you pay.

 

About Starfish Accounting

Starfish Accounting provides accounting, tax and bookkeeping services to small businesses and works primarily with women in business.  Georgi Rollings, the founder of Starfish Accounting, is a qualified Chartered Accountant with more than 15 years experience.  Georgi is also proud mum to beautiful twin girls, and juggles business and babies out of her home office in Maidenhead, Berkshire.

Tel:  01628 299 310

Email:  info@starfishaccounting.co.uk

Web:  http://www.starfishaccounting.co.uk

Blog:  http://blog.starfishaccounting.co.uk

Facebook:  http://www.facebook.com/StarfishAccounting

Twitter:  https://twitter.com/#!/StarfishAcc