When starting a new business or starting a business online there are things you’ll need to spend money on in order to get up and running. These are your startup expenses.
Startup expenses are ‘sunk costs’, meaning you won’t get back what you spend, regardless of whether your business succeeds or not. These expenses are essential in not only getting your business to market but determining how successful you are in the early months and years of your operation.
That’s because the money you invest in your business early on will determine how quickly you can attract and engage a loyal audience, thus bringing in enough revenue to stay afloat and scale.
Examples of startup business expenses include:
- Marketing and branding: Money spent on web design, website hosting, logo design, content creation, social media advertising, business signage, flyers, posters, brochures, business cards and any other marketing collateral.
- Professional fees: Money spent on business consultants and advisors to help with writing a business plan, for example, or accountants and solicitor fees for registering your business with Companies House.
- Recruitment fees: Money spent on job boards to advertise vacancies or recruiters to hire new employees.
- Registering your business: As mentioned above, this is a one time fee that you will pay after you choose your company formation type.
What are startup assets?
Unlike startup expenses, startup assets are things you’ll invest in that have ‘asset value’. This simply means they retain their value over time.
For example, if you’re setting up a photography business, your camera, laptop and printer would be assets. These all have sell on (asset) value and could be sold to make your business some money back.
If your asset qualifies, you can deduct the full cost of the item from your profits before tax under HMRC’s annual investment income (AIA). So while you’ll still need to account for assets in your initial startup calculations, these costs aren’t sunk expenses in the same way that a lot of other purchases will be.
AIA can be claimed on most plant and machinery up to the AIA amount. The AIA amount varies frequently, so make sure to check the GOV.UK website for the latest numbers. Here are the most recent reported amounts, as of June 2020:
| Sole traders/partners | Limited Companies | AIA |
| 1 January 2019 – 31 December 2020 | 1 January 2019 – 31 December 2020 | £1 million |
| 1 January 2016 – 31 December 2018 | 1 January 2016 – 31 December 2018 | £200,000 |
| 6 April 2014 – 31 December 2015 | 1 April 2014 – 31 December 2015 | £500,000 |
| 1 January 2013 – 5 April 2014 | 1 January 2013 – 31 March 2014 | £250,000 |
| 6 April 2012 – 31 December 2012 | 1 April 2012 – 31 December 2012 | £25,000 |
| 6 April 2010 – 5 April 2012 | 1 April 2010 – 31 March 2012 | £100,000 |
| 6 April 2008 – 5 April 2010 | 1 April 2008 – 31 March 2010 | £50,000 |