Freelancers can deduct their allowable business expenses from their turnover each tax year and save on their Self Assessment bill. A freelancer earning £30,000 a year before tax, with £5,000 of expenses, earns £25,000 of taxable profit.
Understandably, not every expense will fall under the category of 'allowable'. This is your guide to which costs can be claimed and which can't.
Everyday running costs and equipment
Stationery, software, and office equipment you buy for business purposes is allowable.
- Phone, mobile, fax and internet bills
- Postage
- Stationery
- Printing, ink and cartridges
- Computer software (one-off purchases and regular subscriptions)
- Uniforms or personal protective equipment
If you have a business premises:
- Rent
- Business and water rates
- Utility bills
- Property insurance
- Security
Travel costs
Travelling to meetings, training courses, and other business trips are included.
- Vehicle insurance
- Repairs and servicing
- Fuel
- Parking
- Hire charges
- Vehicle licence fees
- Breakdown cover
- Public transport
- Taxis
- Hotel rooms
- Meals on overnight business trips
Staff and agencies
Your freelance business can claim for staffing and agency costs.
- Employee and staff salaries
- Bonuses
- Pensions
- Benefits
- Agency fees
- Subcontractors
- Employer’s National Insurance
- Training courses related to your business
Banking, finance, and legal
Many bank charges are allowable. You can also claim the cost of hiring legal specialists and accountants.
- Hiring accountants, solicitors, surveyors and architects for business reasons
- Professional indemnity insurance premiums
- Insurance policies
- Bank, overdraft and credit card charges
- Interest on bank and business loans
- Hire purchase interest
- Leasing payments
- Alternative finance payments, for example Islamic finance
Advertising your business
Many promotion and marketing costs are included in your allowable expenses.
- Advertising in newspapers or directories
- Bulk mail advertising
- Free samples
- Website costs
- Subscriptions to trade or professional journals
- Trade body or professional organisation membership
Heating and electricity costs if you work from home
This is where it can get slightly more complicated. You can claim for only the portion of energy used for your business activities. For example, if you work in one room of your home, the total energy cost for the month or year should be divided by the total number of rooms and the number of days worked.
If you work in a room which has multiple purposes, like your dining room or kitchen, you can
You can claim for a relevant portion of:
- Heating
- Electricity
- Council Tax
- Mortgage interest or rent
- Internet and telephone
If the above isn't practical you can use Simplified Expenses instead
Sole traders can also use flat rates to calculate some expenses, including:
- Business costs for some vehicles
- Working from home
- Living in your business premises
There are different flat rates for vehicle costs, working from home, and living at your business premises.
Simplified expenses are right for some freelancers and not others. Use this .Gov tool to find out which expense calculation you should use.
How to claim
You should keep track of your allowable expenses throughout the year, and keep proof in case HMRC ask to see it in the future. The easiest way to do this is to use freelancer accounting software or an expense tracker.
When you file your Self Assessment each year, your total allowable expenses will be automatically calculated and ready to file.
Remember, there are always exceptions and exclusions. Some expenses which appear to be appropriate business expenses (like taking a client for lunch or buying a business premises) aren't allowed.
Check .Gov for the full details on allowable expenses for freelancers and sole traders.
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