UK Help with understanding different types of Self Employed expenses.

[Matthews123]

I’m a freelancer in the UK.

Trying to fill out my tax return.

I'm confused about the different types of expenses I have.

I have straightforward business expenses i.e a hard-drive I needed to buy for my business, notebook, travel etc

But I also have reimbursed expenses i.e this year I took on a large job with a theatre company. The company that contracted me gave me a budget to buy some kit. I spent £3500 on kit and they reimbursed me the day after I invoiced them.

I have a few other expenses like this. I am confused about how these expenses work. The way I am seeing it/understanding it in my head is like I loaned the company I was working with £3500 and they paid me back. It wasn't my expense. The kit belongs to them and is at their office.

Without that particular expense my income would be £16,000 and my expenses would be £2000 this year but with that expense my income is £19,500 and my expenses £5,500.

I was told a while ago that it was considered suspicious if you had huge expenses?

Could someone explain to me how this works? and Do I need to declare those types of expenses? and if so do I still need the receipts?

Thanks so much

 

[Becky]

Yes, those are your expenses and should be recorded. You should also keep the receipts etc. The Self-Assessment notes should be useful to you here:

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/690288/sa103f-notes_2018.pdf

 

[Matthews123]

Thanks Becky.

Do you know what does and doesn't count as a disbursement?

 

[Becky]

Do you know what does and doesn't count as a disbursement?

That's a pretty broad question, do you have particular examples in mind?

 

[Matthews123]

Yes.

I bought a hard-drive to put content on for a company that I am working with. The hard-drive is for them not me. They have it now. They reimbursed me via invoice within the week.

In my bank I have the £89 going out for the hard-drive and then £89 coming in - it looks like income but it isn't.

Thanks

 

[Becky]

it looks like income but it isn't

Actually it is; effectively what has happened is that you bought the hard drive, and then sold it to your customer. From a tax point of view the income is entirely offset by the cost, so it does not give rise to taxable income.

It might be worth reading through the support from HMRC, it can be pretty useful for anyone starting out as self-employed:

https://www.gov.uk/guidance/help-and-support-if-youre-self-employed