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Jake T
April 3, 2024
Question

How should pre-trade expenses be recorded for a self-employed (UK)?

  • April 3, 2024
  • 1 reply
  • 0 views

Hi all, please advise: Everywhere it is stated that expenses incurred before the start of trading activity should be treated as expenses occurring on the day trading activity commences. But what should be done with expenses that, while incurred before the start of trading, still fall within the same tax year? What date should be used to record such expenses - the actual date (since they still occur within the tax year) or the date trading activity begins?

 

EXAMPLES:
1. A drill bought 5 years ago - should obviously (for me) be dated on the first day of trading.
2. A table bought a month before the first day of trading (within this tax year) - should it be recorded under the true/invoice date or a fake one (the first day of trading)?

 

Additionally, is there any trick I should use recording such expenses or can I use my Chart of Accounts as I normally do after the start of trading activity?

Kind Regards, Jake, a novice self-employed in the UK.

1 reply

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Irene R
April 3, 2024

Welcome to the Community, Jake T.

 

Before anything else, I would to clarify on what product on QuickBooks are you using to record your expenses, are you using QuickBooks online or QuickBooks Self-Employed?

 

Furthermore, let me share insights regarding recording incurred expenses in QuickBooks Online (QBO). Expenditures incurred before trading activity begins but within the same tax year should generally be recorded on the day trading activity officially starts. This is by the principle of matching expenditure to revenue for a particular period.

 

Moreover, in recording your incurred expenses what to use in recording them, and whether to use the Chart of Accounts or not, I highly recommend speaking and seeking advice from your accountant for additional guidance.

 

If you don't have an accountant, feel free to visit this page to find an accountant for your business: Find a QuickBooks ProAdvisor.

 

Moreover, check this blog that discusses the guidelines for being a sole trader: Account and Bookkeeping: A Guide for Sole Traders.

 

Don't hesitate to comment below if you have additional questions concerning your incurred expenses upon recording them in your QBO. I'll be here to answer them any time. Have a great day ahead!

J
Jake TAuthor
April 4, 2024

Thank you. Do I take it right that even the expenses happened a day or a week before my official first day of trading should be recorded on the first day of trading (not the actual date)? Please advise.

 

Just FYI, I use QBO, not QB self-employed.

E
emmam6
April 4, 2024

Hello Jake T, if expenses happened in the same tax year you can record them on the exact date they happened as they will appear in the financial reports and tax reports (if you are VAT registered) for the same period. It is best to add things as closely as possible as to when they actually happened as much as possible. Any other questions feel free to ask them here.

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