If you’re setting up a website, find a web host is on your huge list of things to do. But do you really know what a webhosting company does or do you just know that you need one?
Do you know what a good web host looks like? is an important question to ask yourself before signing up to a webhosting package.
New and experienced website owners are often confused by the tax treatment of webhosting costs. Which bits, if any, are actually tax deductible?
As always knowing what tax relief is available on your business costs is important because it can help you make financial decisions around your online expenses like webhosting.
Keep reading to find out:
- How webhosting works (in plain English).
- Who needs a webhosting company.
- 5 things a good webhosting company does.
- Tax treatment for webhosting costs.
How webhosting works
All websites from businesses to personal blogs need to be stored on a website server. This server is the actual hardware that stores all the pieces of your website, like: images, videos, text, HTML and CSS files. And it makes them accessible to everyone that’s connected to the internet.
When someone searches for you, their computer makes a connection to your server. It then sends them your website files. It’s how you are found online.
Even with this simple explanation of how webhosting works, you can see how important your server is to your online visibility. If it doesn’t work, you become invisible. It’s not just where your website files live it’s the platform you need to connect to the internet.
Who needs a webhosting company?
You can sort out web hosting yourself. But its complexity and cost mean that this is really only a viable option for large companies. With existing internal expertise, they may find that it’s more cost-effective to keep everything in-house.
It’s not only the cost. It’s time especially if you’re self-employed. You don’t have time to do this, as well as everything else involved in running your business.
And if you’re publishing a personal blog, you still need to be found online. Particularly if you’re playing the long-game in terms of potential income.
So, most individuals and businesses look for an external web host. Web hosting companies literally host your website’s data on their servers. You’re effectively renting space on their server for your website to live in.
5 things a good web hosting company does
As you’ve already started thinking, web hosting isn’t just a storage solution. The quality of your web host’s service dramatically affects your website’s presence online. Of course, you must assign a budget to this cost before you start your search for a new webhosting company. Get the best value you can sensibly afford.
5 questions to ask to ensure you’ve got good quality webhosting
- What’s the capacity to grow?
Look to see if more resources are available so that your business’s growth can be accommodated over time.
- Where’s the safety net?
Imagine the worst – it all goes wrong and your website goes down. You need to decide if its business critical for you to make 24/7 customer support a priority. Make it a non-negotiable as you look through your options.
- Is it safe?
Protection from assorted online attacks is crucial. Check the service has DDoS protection and malware scanning. Some may have additional security options, if you need them.
- What speed are you doing?
We’ve all done it. A site takes a few seconds longer to load and we’re off somewhere else. Don’t let that be you. Specifically check how fast the loading times are. Don’t assume it’ll be fast because ‘most sites are nowadays.’
- How reliable is the service?
If the servers go down, your website goes down. The impact is obvious. Webhosting companies talk about their reliability in terms of ‘uptime’. Focusing on how long they keep everybody online, expressed as percentage. Ideally, you’re looking for 99.9% uptime.
As extras, some webhosting companies offer other services that help you manage the running of your website. Things like email services, databases and even website building tools. You need to work out if they’re worthwhile add-ons to your webhosting package.
UK Tax treatment of webhosting costs
Good news here if you’re self employed and running your own business. You can claim tax relief on the cost of webhosting, as a business expense.
If you are a VAT registered business you can reclaim the VAT paid on your web hosting package so make sure you provide your accountant with your VAT invoice.
The tax treatment of different digital expenses can get a little murky because some fall under capital expenditure and some are under revenue expenditure.
Capital
The elements of setting up your website that HMRC deem capital are:
- Hardware: your physical computer, laptop, printer.
- Domain names.
- Infrastructure.
- Website functionality software like WordPress.
Revenue
Most of the costs involved with the maintenance and updating of your website are normally considered revenue costs by HMRC. This includes research, pre-planning and webhosting.
So the cost of webhosting is deducted from your profit figure, along with all your other business expenses which will reduce your tax bill accordingly. All you have to do is keep your invoices.
Like everything doing your homework before committing to a webhosting package is recommended and knowing what tax relief is available on the cost of your package is helpful in making a more informed decision.
We wish you the best of luck in finding the best webhosting package for you and in running a successful website business.
