Common Expense Categories
Where do your business costs go on the P&L? A guide to the four expense categories in Clear Books Tax's micro-entity format.
Where do your business costs go on Clear Books Tax's P&L? This guide explains each expense field and what to include, following the micro-entity format under FRS 105.
The Four Expense Categories
Clear Books Tax's P&L uses the statutory micro-entity format. All your business costs go into one of four fields:
| Field | What goes here |
|---|---|
| Cost of raw materials and consumables | Materials, stock, packaging, supplies used to produce goods or deliver services |
| Staff costs | Salaries, wages, employer National Insurance, pension contributions, employee benefits |
| Depreciation | Reduction in value of equipment, vehicles, and other fixed assets in your accounts |
| Other charges | Everything else — rent, insurance, subscriptions, bank charges, professional fees, utilities, travel, office costs |
Cost of Raw Materials and Consumables
This is your direct cost of producing goods or delivering services. Include:
- Raw materials and components
- Stock purchased for resale
- Packaging and shipping materials
- Consumable supplies used in production
- Subcontractor costs directly related to production
Staff Costs
Everything related to employing people. Include:
- Gross salaries and wages (including director's salary)
- Employer National Insurance contributions
- Employer pension contributions
- Employee benefits (health insurance, company car benefit costs)
- Statutory sick pay, maternity pay
Depreciation
The accounting write-down of your fixed assets. Include:
- Depreciation charges from your accounts
- Amortisation of intangible assets
- Impairment losses on fixed assets
Other Charges
This is the catch-all for every business cost not covered above. Common items include:
| Category | Examples |
|---|---|
| Premises | Rent, rates, service charges, utilities (gas, electric, water) |
| Office costs | Stationery, printing, postage, phone, broadband |
| Professional fees | Accountant, solicitor, tax software subscriptions |
| Insurance | Business insurance, professional indemnity |
| Travel | Business travel, mileage, accommodation |
| Marketing | Advertising, website costs, business cards |
| Bank charges | Account fees, transaction charges, interest paid |
| Repairs and maintenance | Equipment repairs, property repairs (if not capitalised) |
| Subscriptions | Trade memberships, software licences |
| Sundry expenses | Anything else not covered above |
Mapping From Bookkeeping Software (Xero, QuickBooks, FreeAgent, Sage)
If you run a P&L report from your bookkeeping software, the headings won't match Clear Books Tax's four fields exactly. Here's how to translate them:
Typical bookkeeping layout → Clear Books Tax field:
| Bookkeeping item | Clear Books Tax field |
|---|---|
| Cost of Goods Sold, Cost of Sales, Direct Materials | Cost of raw materials |
| Direct Wages, Labour, Subcontractors (production) | Cost of raw materials (if production) or Staff costs |
| Salaries, Wages, Employer NI, Pension | Staff costs |
| Bank charges, Insurance, General Expenses, Rent, Vehicle, Telephone, IT, Legal | Other charges |
| Depreciation | Depreciation |
Example: A Xero P&L shows Administrative Costs = £25,771 (including Salaries of £16,760). Enter:
- Staff costs: £16,760 (salaries) + any direct wages
- Other charges: £25,771 − £16,760 = £9,011 (admin costs excluding salaries)
What About Disallowable Expenses?
Some costs are included in your P&L but aren't deductible for tax purposes. Common disallowable expenses include:
- Client entertaining — meals, drinks, events for clients
- Fines and penalties — parking fines, HMRC penalties, court fines
- Depreciation — added back automatically (capital allowances replace it)
- Charitable donations — claimed separately, not through the P&L
Common Questions
Q: My accounting software has 20+ expense categories — how do I fit them into four fields? A: Add up all your direct production costs → Cost of raw materials. Add up all staff-related costs (salaries, wages, employer NI, pension) → Staff costs. Take your depreciation figure → Depreciation. Everything else → Other charges.
Q: My bookkeeping P&L shows salaries inside the Administrative Costs total — do I include them in Other charges? A: No. Salaries always go in Staff costs, even if your bookkeeping software groups them under administrative or overhead costs. When translating from a bookkeeping P&L, subtract any wages and salaries from your admin total before entering the remainder as Other charges. If you include them in both fields, they'll be double-counted and your profit will be understated.
Q: Where do I put director's loan interest? A: Interest paid on a director's loan to the company goes in Other charges. If the director is charging interest, it's also a disallowable expense (add it to the disallowable expenses field).
Q: I'm a property company — where do I put repairs? A: Property repairs go in Other charges. They reduce your property income for tax purposes. For capital improvements (structural changes, extensions), consider whether capital allowances apply instead.
Q: Where do I put the cost of filing with HMRC or Companies House? A: Other charges. Filing fees and tax software subscriptions are allowable business expenses.
Q: My company only has a few small expenses — do I need to split them across fields? A: If all your costs are general overheads with no staff costs or raw materials, you can put everything in Other charges. Only use the other fields if you have costs that genuinely belong there.
Still Have Questions?
If you're unsure where a specific expense belongs, get in touch.
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