With the numerous benefits that come hand-in-hand with being self-employed, it’s not hard to see why there are now more people than ever joining the contracting sector.
As a contractor you have the opportunity to have more control, flexibility, a better work/life balance, as well as being able to potentially earn more than a permanent worker in the same role.
A great benefit to contracting is that you are able to claim back on expenses – as long as they are made wholly and exclusively for the running of your business. This means that you can reduce your tax bill at the end of the year due to the fact that you won’t be taxed on items and purchases that are needed for your company.
For many contractors, it is necessary to take the time to continue to learn your trade and develop your skills within your field, especially for an industry that will always be evolving – such as the technology sector.
Training can be quite expensive; especially if it is something you have to do on a regular basis. Luckily, this does count as a legitimate expense – as long as it will help with building and improving your existing skills and help to advance the way in which you carrying out your duties.
There is also the fact that you are allowed to claim back on the travel costs if having to attend a different location for your training – as long as it is a temporary site for you.
It does get a little more complicated if the training is to acquire a new skill, as in most cases the costs of this type of training would not be allowable. You may need further advice and guidance from your accountant to work out what is the best way to claim back on your specific type of training.
If you do need to have training abroad then you will need to prove to HMRC that this is absolutely necessary (a requirement of your contract) and not just an excuse to have a holiday paid for through expenses!
You may be asked to provide specific details of the training and explain why this particular training is essential for developing your skills. There is also the fact that you will not be able to make any other claims while you are out there when it comes to any other activities that are seen as being leisurely and are in no way related to the course you are attending.
To find out more about what expenses you could claim or about making the move to contracting, please call Sophie on 01442 795 100 or email firstname.lastname@example.org.
Types of expenses
How you are contracting – whether as a Sole Trader, Limited or Umbrella company, will determine what counts as an allowable expense for you, however, Limited Company contractors are able to claim back on a much wider range of expenses compared to the other methods.
The most common types of contractor expenses includes:
- Your company’s commercial rent, heating and lighting
- Computers and software
- Accountancy fees
- Advertising or marketing costs (such as a website)
There is also the fact that if you work from home, it may be possible for you to claim an allowance to cover the costs for things like heating, electricity, internet and telephone use.
It is important to be aware that with any expenses you wish to claim, you will need to keep hold of receipts for proof of these purchases, for a minimum of 6 years.
At the end of each tax year you will need to add up all of your allowable expenses and factor them into your accounts and tax return.
If you have any questions on expenses or contracting, please call Sophie on 01442 795 100 or email email@example.com.