Look after the pennies and the pounds will look after themselves – or so the saying goes. And there’s certainly an obvious truth in it, which will be why my gran seemed to say it on a weekly basis. However, a survey by software provider FreeAgent seems to suggest that freelancers and small businesses are ignoring the wisdom of this old proverb entirely.
The Home of Your Missing Millions?
Freeagent’s research revealed that UK micro-business owners are often failing to claim for expenses under £10 – and by doing so, are leaving nearly a quarter of a billion pounds worth of expenses unclaimed every year!
Using expenses logged by their own customers in 2015, Freeagent estimated that the average micro-business owner accrues around £216 worth of expenses with individual values of £10 or less each year. They also discovered, via a separate survey of web professionals, that around 22% believed it wasn’t worth claiming expenses that were under £10. If this is indicative of the views and practices of the UK’s 5 million micro-businesses, then around £238 million is going unclaimed.
Don’t Subsidise Your Business!
The survey also established that only 39% of respondents claimed back all of their business expenses, with an astounding 20% revealing they don’t claim for any of their business expenses at all! Yet in doing this, they are effectively subsidising their business, failing to keep track of the expenses it incurs and ultimately leaving themselves with no clear idea of how well their business is faring financially.
Ed Molyneux, CEO and co-founder of FreeAgent, said: “In order to avoid overpaying tax, all small business owners should be scrupulous about reclaiming their expenses. But it’s surprising how few web designers and developers in the UK actually do claim everything back, and how many ignore or dismiss certain expenses for being so small.
“Whether it’s £5 or £500, that’s all money which you can claim tax relief on, and in the case of the smaller expenses, it’s also money that quickly adds up. We found that nearly one in four micro-business owners wouldn’t claim expenses worth £10 or less – presumably because they’re too small to bother with or it takes too much time to log them – and that suggests hundreds of millions of pounds are going unclaimed across the whole of the UK.
“Even for a freelance business or small agency, those little expenses can end up being worth hundreds, or thousands, of pounds when they’re all combined – so it’s strange that people seem to think it’s too much hassle or not worth the effort to claim these back.”
I had a delightful letter today from HMRC reminding me that it’s a new financial year and that therefore, my tax return for 2015-2016 is now due, thank you very much. I’m sure you’ve received a similar letter (or have that joy to look forward to soon).
When I submit my tax return, I will be claiming for every biro, notepad, broadband bill, utility cost and professional fee I’ve incurred. Nothing will go unclaimed. Why? Because if you asked me to drop a £5 or £10 note down the drain every other day, I’d say no. I work hard for that money and I’m not giving it away unless it’s to a worthy cause (or recently, DIY stores, but no matter).
And if you too would hold on tightly to those notes, then why are you giving them away to the taxman…?!