As a business owner, managing your finances and taxes can feel like a never-ending task. It’s easy to miss a few deductions or realise after filing that you forgot to include a business expense. One common question business owners often ask us is: “Can I backdate my business expenses?” Whether you’re trying to lower your tax liability or ensure accuracy in your accounting, it’s essential to understand the process of amending your tax returns.
In this blog, we’ll walk you through the steps for correcting missed expenses on your tax return, explain when and how you can amend, and offer some tips to avoid triggering any red flags with HMRC.
Can I backdate business expenses?
While you can’t technically backdate business expenses in the sense of retroactively inserting them into previous financial records, you can submit them through an amended tax return if they were legitimate expenses from a prior year. For example, if you realise after filing that you forgot to include something important, don’t worry, there’s a process in place for correcting these kinds of mistakes.
Submit an amended tax return
If you’ve already filed your tax return and discovered that you left out expenses, the way to remedy this is by filing an amended return. Amending allows you to correct the record, add in overlooked business expenses, and ensure that your return accurately reflects your financial activity.
You can amend your tax return through HMRC’s online portal or by submitting the appropriate paperwork. HMRC allows amendments to returns up to 12 months after the original filing deadline. So, if you filed your taxes for the 2022/2023 tax year in January 2024, you would have until January 2025 to submit any changes.
Bring in missed expenses
While amending your tax return is a straightforward process, you should keep in mind how substantial your missed expenses are. It’s perfectly fine to correct mistakes and add in missed expenses, but if the amount is too significant (say, more than £10,000), this could potentially raise a red flag with HMRC.
Amending for small or moderate missed expenses won’t draw much attention, but a large, unexpected increase in expenses compared to previous years could make your return stand out. If HMRC notices major changes or discrepancies in your expense accounts, they might decide to investigate further. To avoid this, try to keep amendments reasonable and make sure that any changes are well-documented and justified.
Common business expenses you can amend
If you’re filing an amended return to include missed business expenses, here are some commonly overlooked categories:
Repairs and maintenance
Expenses related to repairs and upkeep for your business premises or equipment are legitimate deductions, as long as they’re not capital improvements (which would be handled differently for tax purposes).
Sundries
Small, incidental expenses such as office supplies, cleaning materials, and other minor items are often categorised as “sundries.” These costs can easily slip through the cracks, but they’re fully deductible as business expenses, so don’t forget to include these when amending your return.
Home office deduction
If you work from home, you might be able to claim a portion of your household bills (rent/mortgage, utilities, internet, etc.) as business expenses. This is often overlooked but can lead to decent savings.
Travel and mileage
Many business owners forget to log mileage for work-related trips or claim travel expenses such as train fares, taxis, or flights. Remember, if it’s for business purposes, it’s a deductible expense.
Professional services
Expenses for accountants, consultants, or legal services are often forgotten but are legitimate deductions. If you hired professional help for your business, make sure you’ve claimed it.
Can you carry business expenses forward?
If you missed the deadline to amend your return, or if your expenses were incurred too late in the previous year to include, you might be wondering if you can carry them forward. Some business expenses, such as net operating losses, can indeed be carried forward to future tax years. While you won’t see immediate tax relief, carrying expenses forward ensures that you still benefit from the deductions down the road.
When is it not worth amending?
It’s also important to assess whether it’s worth amending your return for small or insignificant expenses. If you missed a £50 office supply purchase, for example, it might not be worth the effort of going through the amendment process. However, for larger expenses, particularly those that could substantially reduce your tax liability, amending your return is a wise choice.
Stay organised to avoid future issues
Of course, one of the easiest ways to avoid needing to amend your return in the future is by keeping organised throughout the tax year. Use accounting software, save receipts digitally, and schedule regular check-ins to make sure you’re capturing all of your business expenses. Tools like QuickBooks or Xero can help you manage your expenses in real time, so nothing slips through the cracks, and you avoid the headache of hunting down receipts and other paperwork!
Need help managing your businesses expenses and tax? Contact our friendly team today, we’d love to help!