Software Subscriptions

This Overheads code records the cost of software subscriptions incurred in running the business. As an expense account, it normally carries a debit balance: debit entries increase the balance (recording new costs) and credit entries decrease it (for example, correcting an error or a refund received).

Real-world examples

Digital agency or tech team

Substantial monthly subscriptions across design, hosting and dev tools, often billed in US dollars from overseas providers. Where the supplier is based outside the UK, no VAT is charged on the invoice — the reverse charge applies instead, and the UK business self-accounts for VAT on its own return rather than paying it to the supplier. A bundle of subscriptions costing the sterling equivalent of £400 a month is debited in full to 7606 (Software Subscriptions), with the reverse-charge VAT self-accounted for separately rather than added to the invoice.

Trades or small business

A handful of low-cost UK-supplier subscriptions — accounting software, a scheduling app — invoiced normally with UK VAT added. £30 (£25 net of VAT) is a debit of £25 to 7606, a debit of £5 to 2201 (Purchase Tax Control Account), and a credit of £30 to 2100 (Creditors Control Account). Total annual spend here might be a fraction of what a tech-heavy business pays for a single tool.

Commonly confused with

Because code 7605 (Management Charges Payable) sits right next to this one in Overheads, it's a common mis-posting target. Code 7606 is specifically for software subscriptions, while 7605 covers management charges payable — similar in nature, but keeping them separate is what makes the overheads section of your management accounts meaningful rather than a single lumped total.

What a mis-posting here costs you

An error posting to Software Subscriptions won't change total overhead spend, but it will distort the overheads breakdown that's usually reviewed line by line each month to spot cost creep.

Other codes in Overheads