Expenses are part and parcel of life as an independent contractor. Whilst your contractor accountant will be keen for you to claim all your allowable expenses, doing so and managing them in the first place can be a difficult task. Having to record, store and backup your receipts does sound like a lot of hassle but will in fact see you pay less tax on your company profits.
It really does pay to claim your expenses. Following this recent guide to what to claim on expenses, we thought we’d share a few tips on managing your contractor expenses with ease.
Keep your receipts
You’ll pick up plenty of receipts during your time contracting, particularly if you operate a service-based business and need to purchase supplies and other equipment to fulfil your role. Self-employed contractors are expected to keep their expense receipts for five years – that’s one year less than companies looking to claim on expenses. This is a long time, particularly when you’re faced with the challenge of where to store them.
This blog post from The Balance highlights the importance of finding a system that works for you when storing records:
“Rather than stuffing all of your business receipts into a desk drawer, a better system is required for when it’s time to do bookkeeping. Of course, discovering a disorganized mass of receipts can create a mess of trouble. Keeping business receipts organized can help business owners monitor the progress of their business along with preparing them for financial statements. It also helps identify sources of income, keeps track of expenses, and prepares items for tax returns.”
Embrace digital backup and tracking
Backing up your original receipts is made easy with the sheer number of apps available these days. Google Drive, Dropbox and Receipt Bank allow you to capture expense receipts and store them securely. For those looking to record travel expenses, and more specifically mileage usage, there are apps for that too. There are a selection of great free mileage tracking apps available with capabilities that go far beyond the traditional business mileage spreadsheet.
Stay organised with regular admin
Whilst our accountants will be on hand to provide ongoing support throughout the tax year, setting some time aside to manage your expenses and wider bookkeeping obligations is recommended. Just one hour a week can help you organise your expenses, manage your invoices, and monitor cash flow. Without these regular slots, expenses can quickly become an unmanageable task. You wouldn’t be the first contractor to leave business expense receipts and then forget about them.
Staying organised, with our help, is key to unlocking the benefits of contracting. The annual and one-off expenses management as well as monthly costs will save you time and money. As well as claiming for operating expenses, don’t forget to file your receipts for hidden expenses like private pensions, insurance and health cover.