Small business owners risk overpaying tax and losing money because they don’t manage their expenses properly, according to new research from cloud accounting company FreeAgent.
In a survey carried out by YouGov for FreeAgent, just one in five micro-business owners said that they claimed back all of the expenses they incurred for their business.
The poll, which surveyed more than 500 micro-business owners/sole traders, revealed that 21% of respondents said they claim less than half of their small business expenses, with 10% admitting they claimed “hardly any” or none of their expenses.
In addition, a quarter of micro-business owners surveyed said they would not bother to claim an expense if it cost them up to £5, while a further 19% said they would not claim anything worth up to £10.
This can significantly add up given that in 2014, FreeAgent logged a total of 2.1 million expenses worth a combined total of £146 million.
The research also revealed that the main reason micro-business owners haven’t claimed back an expense is that they don’t think they’re worth claiming – with 37% of respondents admitting this. Other reasons for not claiming expenses included losing or forgetting the receipts (30% of respondents), not wanting to face the admin involved (12%) and worrying that HMRC will challenge them (11%).
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 people 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. Before too long, those little expenses can be worth hundreds of pounds, so it’s strange that people seem to think it’s too much hassle or not worth the effort to claim these back.”