Essential Expense Tips When Using Accounting Software

Whether you're diving into Xero or another bookkeeping tool, it’s easy to assume the tech is doing all the heavy lifting. But a few simple habits can make the world of difference - and help avoid expensive mistakes later on. This is relevant to all but particularly important for those of you who are embarking on doing your own book-keeping within Xero or another accounting app.

The most important aspect to this is: We will assume that the bank account linked to your software is “work-only” unless you notify us.

That in turns means that we assume all expenses = tax deductible and all income = earned income: unless you let us know otherwise.

So keep on reading for a few little reminders to keep you on track!

Travel & Subsistence

• Train fares, flights, taxis to gigs, rehearsals, meetings, studio sessions, car hire etc.

• Commuting to a regular place of business – PAYE job or a recurring freelance job such as a very regular peri-teaching job is not allowable. It should be allocated to a personal account (e.g. owner drawings) if using software.

• If there is a mixture of business and personal elements to the cost e.g. on TFL, or trips abroad where you combine some work and some fun, you need to allocate an appropriate business use % (BU%).

• You are best placed to decide what that % will be – we’ll share our experience with the most common % claims on things like mobile phones, TFL etc. but you know your own working pattern best.

• Using a dedicated work debit card or Oyster really helps with this conundrum!

• If you are claiming car mileage, then you cannot claim any costs to do with the car itself – so no claims for mot, servicing, fuel etc. The alternative is to claim a BU% on these actual costs. But you must choose one or the other - and then keep that election for the duration of the time you own the particular vehicle.

• Subsistence is related to travel: as a general rule, if the travel is allowable, then so will the subsistence be.

• If you’re using Xero – there is functionality that allows you to split a specific expense line into BU% and PU% so let us know that you need the video on how to do this!

• Following on from that, you can even update your Xero account to include a “rule” that always allocates certain costs in this way. But this needs to be added – it’s not a default within the software.

Wardrobe & Grooming

• Costumes or stage outfits that are clearly for performance — black concert wear that is exclusively for concerts, tails, DJ’s, full frocks etc.

• HMRC’s language likens allowable items to a costume – so if it’s akin to a costume, then is likely ok!

• Branded merch you wear for promo shoots or performances.

• Haircuts, makeup, and grooming — technically, HMRC sees these as personal

  upkeep, and they are not allowable because they are not wholly and exclusively for work.

• Having said this, we’ve always supported small BU% claim on appearance-related costs because of the public-facing nature of your performance work. But we’re talking a small amount here e.g. 5% - 10% of the total cost. And do please keep in mind, that it is open to challenge by HMRC so if you don’t want to risk having to explain your spa-habit, then don’t claim it at all. 😊

Business Use vs Personal Use

Mixed-use items - Mobile phone, internet, car, Use of Home etc. You can claim a portion, based on reasonable usage:

• If your phone is 70% work, 30% personal, you can claim 70% of the bill.

• Same goes for broadband, laptops, software subscriptions, etc.

• PS: We’re fine with 100% on Spotify, iTunes, Nkoda etc. as these are essential for your work as a musician.

• If you’re going with actual car costs rather than mileage, then reasonable use applies here too.

• As you know, we ask you to complete our Use of Home (UOH) form to enable us to suggest a reasonable % of costs such as utilities, rent or mortgage etc. This form looks at the total amount of time you spend working from home as a percentage of total hours in a week – FYI, that’s 168!

What’s important:

• Keep a rough log or notes — HMRC doesn’t need minute-by-minute tracking, but you should be able to justify your estimate.

• We like you to take a representative week of work and keep a log of your usage – then you can supply that as the justification for the % claim you’ve made.

Final Tips for Expenses

• We don’t know what we don’t know – if you send us a spreadsheet with total values, then we’re assuming that you’ve taken costs based on the guidance outlined above.

  
  

• In the case of software, we’ve been banging on about a work-only bank account so that the assumptions we make will be accurate! Please don’t let us assume your holiday spending was a work-trip…

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