Things you should be claiming as a freelancer
These allow you to offset business-related expenses against your turnover. This lowers the tax you pay, keeping more money in your pocket.
The way it works is simple. Here’s an example: Your turnover is £35,000, and you claim £12,000 in allowable expenses. You only pay tax on the remaining £23,000, which is your taxable profit. As an aside, you also have an £11,850 personal allowance. This means you don’t pay income tax on the first £11,850 you earn.
Sounds great, doesn’t it? And yet, so many freelancers don’t bother to include allowable expenses on their Self Assessment. This can result in tax over-payment (and is one of the reasons why you might be well-served by an accountant).
Self-employed allowable expenses
To help ensure you take full advantage of your allowance expenses, here’s what you can include in your Self Assessment as a self-employed freelancer:
Business stationery, printer ink, postage stamps, pens and paper, staples… any items you’d normally use for less than 2 years are allowable expenses.
You can claim business software as an expense if you intend to use the software for less than 2 years or if you pay for the software regularly, such as Office 365 on a monthly license.
Rents and rates:
Business rent, business water rates, utility bills and insurance are allowable expenses. If you’re working from home, you can claim these too.
Phone and broadband:
If you have a business phone or business broadband, these are allowable expenses so long as the contract is in your company’s name.
Travel and fuel:
If you travel for business, you can claim travel costs as an expense. This includes fuel for your vehicle and public transport costs. Just keep your receipts and tickets.
Legal and financial costs:
If you pay a solicitor or an accountant a fee, this is an allowable expense. In fact, if you pay a fee to anyone for business purposes this is an allowable expense.
You can claim for advertising and directory listings, digital adverts and website costs. Any public relations work can also be claimed.
Staff and outsourcing costs:
If you have staff you pay or freelancers you pay when outsourcing, these are allowable expenses. Make sure you claim all these as they add up.
Remember - allowable expenses are strictly business-related. They don’t include personal purchases or leisure expenses, such as a cheeky Nando’s and cinema tickets. You’ve to keep everything business-related to comply with HMRC’s rules.
Self-employed capital allowances
You can also claim certain capital allowances. Capital allowances allow you to qualify for tax relief on ‘capital assets’, which are the tools you use to carry out your work, such as computers, scanners and business vehicles.
The AIA (annual investment allowance) for the self-employed in 2018/19 is £200,000. This means you can spend up to £200,000 on capital assets and offset the spending against your income tax. If you overspend, you’ll pay tax on the difference.
Here's a list of the capital allowances you can claim as a self-employed freelancer:
Office furniture such as desks and chairs, computers, printers, appliances and electronics. You can claim the retail value, i.e. what you paid for the items.
Plant and machinery:
You can claim for any plant and machinery you use for business, such as lathes, as well as alterations to machinery. However, these assets must be business-owned and not leased. If they’re leased, they’re not capital assets.
You can claim a van or any other commercial vehicle as a capital allowance, so long as the vehicle is in your business’s name. Cars don’t qualify for AIA, so you have to work out what you can claim with writing down allowances.
Remember - as with allowable expenses, capital allowances are strictly business-related, and you’ve got to keep receipts to claim them.
Read our blog post on keeping business and personal expenses separate to find out why you should be organising your business and personal finances separately.
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