There are a rising number of self-employed workers in the UK and it is easy to see. Starting your own business as a self-employed worker can give you a lot of control and flexibility, but there are also many challenges. One of these challenges is managing your finances and you must know how to do this from the start for tax purposes. You should know that there are expenses that you can claim back as a self-employed individual, over and above your self-employed tax threshold which could make a big difference when it comes to your tax bill.
Those who are self-employed often have a number of running costs that they will need to cover for their daily operation. It is important to know what allowable expenses there are so that you can deduct these from turnover – this will give you your taxable profit. So, what expenses can be claimed by self-employed workers?
Travel
If you have to travel for work, you can claim allowable expenses on things like train tickets, fuel, car insurance, parking, and hotel rooms. It can be hard to calculate the costs of car/van expenses over a year, which is why many opt for a flat rate (simplified expenses) for mileage.
Uniform & Protective Clothing
There are many types of self-employed businesses that require the use of uniforms and protective clothing, such as builders and electricians. You can claim for items that aid your safety such as protective footwear, hard hats, goggles, and uniform on your tax return but not for everyday clothing even if this is what you wear for work. This is why you need to keep all receipts for any uniform and protective clothing.
Property & Equipment Costs
Most self-employed operations will require property and equipment, which can be major costs. There are many costs that can be claimed back, such as rent, utilities, insurance, security, equipment, and office supplies. If you work from home, you can claim a proportion of costs like electricity and heating. Again, many use simplified expenses as a way to avoid complex calculations.
Financial & Legal Fees
There are also several financial and legal fees that are deductible, including hiring accountants, lawyers, and architects, professional indemnity insurance, leasing payments, and bank charges.
Employee Training
Any training that you use to develop skills and knowledge for your business can also be claimed (as long as the course relates to the business).
These are a few of the main expenses that can be claimed back as a self-employed worker. It is important to know what you can and cannot claim when completing your tax return so that you can lower your tax bill and improve your bottom line. Financial management can be tricky as a self-employed worker, so it is vital that you know what can be claimed back and track your expenses over the course of the year.