There are now more people than ever before choosing the contracting lifestyle and with the numerous benefits that come hand-in-hand with this way of working, it’s no surprise to see why.
As someone who is self-employed you will have the type of freedom and flexibility that a permanent worker can only dream of, plus there is also the fact that you could potentially earn more than a ‘traditional’ employee who is in the same role.
Another benefit is that contractors are able to claim back purchases that are made for the running of their business, which in turn will reduce their tax bill at the end of each year.
Typical contractor expenses
If you contract as a Sole Trader or through an Umbrella Company you won’t be eligible for as many expenses as a Limited Company, making this the most tax efficient method of contracting.
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.
