As a sole trader, you will pay out for various costs that are needed in order for you to carry out work.
A benefit of self-employment is that you are able to claim back on these expenses and therefore reduce your tax bill at the end of each year.
Obviously, you won’t be able to just claim back on anything and everything, you will need to ensure that each purchase you wish to claim for has been made ‘wholly and exclusively’ for business purposes.
Can all self-employed workers claim the same expenses?
There will be some expenses that all self-employed workers will be entitled to, however, there are some areas that are specific to the type of contractor.
For example, a limited company contractor will have certain running costs that other contractors won’t have to consider, plus they will have additional expenses due to employing their own staff.
An umbrella company contractor is generally unable to claim for expenses due to the fact that they are treated as an employee. However, there may be some situations where it might be considered – such as mileage/travel costs if they’re asked to travel away from a usual place of work by their client.
There is of course the IR35 legislation to take into consideration too – for example, a sole trader who falls ‘inside’ IR35 won’t be entitled to the same benefits as someone who falls ‘outside’.
For more information on this, visit our page IR35 and Sole Traders.
What expenses can a sole trader claim?
As a sole trader working outside of IR35, typical allowable expenses include:
- Travel costs – such as fuel, parking, hire charges, train/bus/taxi/air fares, accommodation while away for business reasons.
- Office costs – such as stationary, printer ink/cartridges, postage, phone/mobile/internet bills.
- Clothing expenses – should you require specific protective wear, a uniform or costume.
- Financial costs – such as hiring an accountant.
- Training courses – they must be related to your current line of work to help improve your skills and knowledge.
- If you work from home, you may be able to claim a proportion of costs for your heating, electricity, Council tax, mortgage interest/rent and internet/telephone use.
What are simplified expenses?
As a sole trader, you have the option to use simplified expenses – this involves calculating some of your expenses using flat rates instead of working it all out individually.
This flat rate method can be used for business costs for some vehicles (cars used for non-commercial use, motorcycles and goods vehicles such as vans), working from home and living in your business premises.
How do you claim for an expense?
All expenses will need to be added to your self-assessment tax return.
Although you don’t need to send proof of your expenses to HMRC, it’s definitely worth keeping records of all business costs should you be asked to provide them at a later date.
If you’d like to sign up or need any further information, please call one our friendly experts on 01442 795 100 or email Jaime at email@example.com.