Working as a contractor will mean that you are able to have a lot more freedom, control and flexibility; there’s also the opportunity to potentially earn more than if you were in the same role but in a permanent position.
One of the main benefits of being self-employed is that you are able to claim back on a wide range of expenses, which in turn will reduce your tax bill at the end of the year.
When it comes to expenses, the key rule is that it must be wholly and exclusively for the running of your business.
It is also 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.
Here we take a look at some of the most common types of contractor expenses:
Office items, equipment and property
Office items that you are able to claim back on includes:
- Company mobile phone bills
- Stationery
- Printing
- Printer ink and cartridges
- Computers
- Computer software
If you rent out a property for your business, examples of what you can claim back on includes:
- Rent
- Utility bills
- Property insurance
If you do use your home as an office, then you are able to claim back a use of home allowance, to cover some of the costs. The allowance is currently set at £4 per week, or £18 per month.
Vehicle and travel expenses
It is possible that you could end up spending quite a bit on travel costs as a contractor and so it will come as a relief to know that you could claim back on:
- The cost of public transport, such as bus, train and taxi fares
- Car parks
- Mileage
- Hotel rooms
- Meals on overnight business trips
Mileage
For cars and goods vehicles, you are able to claim 45p per mile for the first 10,000 miles. This will then go down to 25p per mile once you reach over 10,000 miles.
Just ensure that you make a note of the date of the journey with its start and end location, the reason for the journey and the number of miles.
Company vs personal vehicle
Of course, as a contractor, you may have a vehicle that has been bought through your company or it might be in your name.
If it were your own personal car, then you would need to calculate the mileage used for business journeys and then submit this to the company as an expense claim.
If the car belongs to the company, this means that it is the company’s responsibility to pay for all the running costs of the car.
Marketing, training and subscriptions
As a contractor you will more than likely find yourself marketing your company and its services in order to gain more business, so when it comes to website costs, any free samples you give away and advertising, these all count as being an allowable expense.
Subscriptions for trade or professional journals, as well as trade body or professional membership and any training related to your industry are also claimable.
Financial and legal fees
Other areas that contractors may not be aware that they can claim back on includes:
- Hiring an accountant, solicitor or surveyor
- Professional indemnity insurance premiums
- Charges such as bank, overdraft and credit card charges and the interest on bank and business loans.
If you have any questions about going limited and working from home, please give Jaime a call on 01442 795 100 or email jaime.thorpe@dolanaccountancy.com.
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