Only one out of every four small business owners actually claim the expenses that they spend out of their own personal funds in order to support their business, according to new research commissioned by FreeAgent and carried out by YouGov.
Out of a poll of about 500 SME owners only about a quarter of respondents stated that they claimed all of their business expenses, while another 20% admitted that they claimed only half of their expenses.
Not placing enough value on expenses is the most common reason for people not claiming them, with 41% admitting that they wouldn’t claim back an expense if they didn’t think it was worth claiming. In addition, 35% of business owners admitted that lost or forgotten receipts were a major reason for them not claiming back all of their expenses, while 13% said they didn’t claim expenses because they are put off by the admin required to do so.
22% of respondents also said that they were worried they would claim back the wrong amount, while 19% admitted they didn’t claim all their expenses because they feared being challenged by HMRC.
And only 32% of businesses felt fully confident that they weren’t paying too much tax as a result of not recording expenses properly.
The poll also revealed that nearly three quarters of small business owners and freelancers have wider concerns about their taxes – with 73% of respondents saying that they felt anxiety about the current UK tax system
Ed Molyneux, CEO and founder of FreeAgent, said: “It’s clear that expenses and tax are big issues for people who run small businesses. Nearly three quarters of small business owners admit to feeling anxious about the tax system and many of them are also failing to claim back all of their business expenses. This means they are effectively subsidising their own work, potentially paying too much tax and could be losing thousands of pounds.
“What’s especially worrying is that small business owners aren’t just concerned about claiming back expenses because they think it’s too complicated or they’ll be challenged by HMRC – but they also regularly lose receipts or even just feel that expenses aren’t worth claiming.
“While a simplification of the UK tax system for those who run small businesses would provide some relief, I think many of these people will also benefit from using new technology designed to help them manage their finances more effectively. Today’s accounting systems, based online and accessible via smartphone, help save time and reduce the amount of administration they have to do. They enable small business people to keep on top of their receipts and expenses more efficiently, while ensuring they don’t miss out on claiming for things they purchase for their business out of their own pockets.
“After all, paying too much tax could have disastrous effects on the long term health of a fledgling small business.”