Life can be tough as a freelancer when you’re trying to make ends meet. You’ve taken on the risks of self-employment, which means you don’t have the same protections as an employee at a company.
But to help offset that risk, and to aid you in keeping a stable financial footing while freelancing, you can offset all sorts of costs against your tax bill.
It might surprise you just how much you can claim for against your income tax bill as a freelancer.
But if it’s legitimate expenditure on your business, there’s a good chance it’s an “allowable expense”—meaning you can deduct part or all of it from your tax bill at year end.
You should consult an accountant and HMRC to be sure of what you can claim as costs. But here’s a general idea of just what you could offset as costs—so make sure you’re not missing out.
Your stationary, phone bills, hardware such as a computer, the software—whatever you use in your office, even if it’s your study at home, count as costs if they’re for your business or work. And if you work at home you can count things like council tax, internet, mortgage interest and rent as business costs.
If you need to go out and about for your work, you can offset the costs of travel, be it bus fares, rail tickets, petrol, or whatever it is you use to go from A to B.
Some people need uniforms for their work, or other clothing, such as overalls, protective gear, whatever—if you have to wear it you can claim for it.
Employ people? Or hire subcontractors? All associated costs—salaries, bonuses, pensions, training, etc—can be used to offset your tax bill. If you employ yourself, those costs count for you too. That includes training courses for yourself if they enhance the skills you need to do your work.
Whatever you buy in order to sell on, such as raw materials or stock, counts as a cost to be offset.
Professional and finance
Think solicitors, accounts, insurance premiums, interest payments on loans, bank charges.
Utilities and rates
Any utilities used in the course of your work, such as heating and lighting your office space, and costs such as business rates, can be used to reduce your tax bill. If you work from home, you can calculate the portion of your energy bill that you use while working and deduct that.
Whatever costs you have in promoting your work or business, such as advertisements or a website, are allowable expenses—though claiming for entertaining clients doesn’t count.
If your work requires subscriptions to, for example, professional journals, or newspapers, then go ahead and put them down as deductible costs.
There are tax deductible allowances for capital such as machinery you keep and use for your business, such as cars, and “integral features,” which means things like kitchen and bathroom fixtures, CCTV, fire alarms and so on.
If you have a company, you can also pay yourself in the form of dividend payments, and you get a tax-free allowance of 7.5%.