When you’re working as a freelancer, understanding how to manage your expenses can be somewhat overwhelming. Luckily, there are several expenses you can claim as a freelancer in the United Kingdom, helping to lower your tax burden and keeping your wallet a little thicker. Here are some of the most common overlooked expenses well within the rights of freelancers to claim:
Wouldn’t it be nice if someone would pay you to move? As a contractor, you may end up having to move to complete a job. If you’re moving for less than 2 years, relocation costs are eligible for a deduction. However, any longer than that, even if it’s divided into multiple stints, and you’re unable to claim it as a deduction. So truly, you’re not being rewarded for moving permanently, but rather having the burden of temporary relocation taken off of your taxes.
Accommodation and Travel Expenses
If you know you’re going to spend less than 40% of your time on-site, it might be a smart idea to deduct travel expenses instead of relocation costs. You can’t deduct these costs, however, for commutes going from home to work. For travel, you can go with either a fixed rate, based on a set mileage, or figure out the actual cost of travel. The upside of the fixed mileage rate is you can deduct that mileage, and then deduct other travel-associated costs, such as motor oil and car repairs.
Additionally, other types of travel expenses can be included. If you travel by air, rail, or train, you may deduct these as long as you keep the receipt. While you may deduct hotel costs, these hotel costs must be within reasonable limits; this means it won’t be easy to get a two week stay at a 5 star resort written off on your taxes.
Food, in certain cases, can be deducted! If you’re on a business trip, you may deduct the cost of food and drink as subsistence costs, much in the same way with other travel expenses. There is an exception to this, of course: this doesn’t count for when you’re not a business trip, meaning you can’t just deduct daily lunch and tea-time from taxes. If you are working in a coffee shop or conducting a business meeting there, then you can. The key is it must be solely for the purpose of businesses.
Continuing education is an important part of staying relevant in many freelancing fields, but paying for subscriptions to professional journals and trade magazines can be cost prohibitive. Thankfully, the HMRC has a full list of included trade magazines that are eligible for exemption. This helps you to stay educated in your field, without having to worry about throwing away money on information you might not need. Subscriptions to online tools and services will also be deductible as an expense.
Home Office Expenses
Here’s some great news if you work out of your house: if you’re able to use at least one of your rooms as an office over a full work week, you may be able to get a quarter of eligible utility and home costs recouped. The best part is this exemption covers several types of home expenses: rent, utilities, internet, and more are all included. Additionally, you can use this exemption to cover office supplies like paper and printer heads.
Getting it Wrong
As with anything in life, it’s possible to get things wrong. If you are like most freelancers, you may even be doing your books yourself. This might sound like a good idea at the time, but paying for a good accountant to take care of your tax returns (whether that’s self assessment or corporation tax) is money well spent. The problem with maintaining your own books and filing your returns yourself is obvious: everything depends on the quality of the data you put in. Tax and changing tax laws can mean you overpay tax, leaving you less to invest and take out as drawings. If you need any more convincing, taxation was identified as the number one risk in many risk reports published by Lloyds. Keep your books up to date, but seek professional advice.
Going into business for yourself can be scary. Thankfully, the government’s provided several breaks, in addition to the ones above, to support small businesses like yours. So don’t be afraid to take a deep breath and move forward with your freelancing work, safe with the knowledge some of the burden of running a business out of your home is off your shoulders.