With so many benefits associated with self-employment, it’s easy to see why there are now more people than ever joining the contracting sector.
Not only are you more likely to have a better work/life balance, more flexibility and control, you are also able to potentially earn more than a permanent worker in the same role.
A great benefit with contracting is that you are able to claim back expenses that are made wholly and exclusively for the running of your business. By taking advantage of this perk 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.
Clothing expenses
When it comes to claiming back on clothing expenses, there is a set of guidelines to follow in order to make it an allowable expense.
The sector and type of work you carry out will be a considerable factor when it comes to whether clothing costs can be claimed or not.
For example, if you are contracting in an industry where protective clothing is needed, this would be seen as being a requirement to be able to carry out the work – you might be working on a construction site or you could be a mechanic.
If this were the case then it would be absolutely compulsory for your safety to have items such as protective gloves, overalls, steel toe cap boots or hard hats.
Other clothing that could be claimed back is if you have to wear a uniform for work. There are many circumstances where a contractor would have to present themselves in a uniform in order to be recognised – such as a locum doctor or nurse.
You may also work in the entertainment industry and might need to be in costume, in which case this is also a claimable expense.
Unfortunately, if your situation is that you simply have a dress code to stick to, then you may not necessarily be able to claim these items as an expense. This is due to the fact that one of the main rules is that you cannot claim back on clothing that you would wear outside of work – even if you do often wear it for work too.
If you are still unsure on whether the clothing you are purchasing for business purposes is a legitimate expense, talk to your accountant for further advice and guidance.
Type of expenses
The type of contractor you are – 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.
The most common types of contractor expenses includes:
- Travel
- Your company’s commercial rent, heating and lighting
- Computers and software
- Stationery
- 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.
To find out more about contracting or what expenses you could claim, please call Jaime on 01442 795 100 or email jaime.thorpe@dolanaccountancy.com.
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