Registering as a limited company can help you minimise your tax burden, provided you go the right way about claiming expenses on your tax return. As such, it’s crucial to understand what you can and can’t claim as a business expense.
To give you an introduction to allowable expenses, here are a few things to consider when filing your receipts and managing your accounts, to ensure you pay HMRC not a penny more than you owe.
Going somewhere?
Paying for travel is often the most common burden associated with freelancing and contracting: client meetings, going to and from sites, and attending conference seminars can leech your time and money away like no tomorrow.
Limited companies are allowed to claim 45p per mile for the first 10,000 miles you cover, which drops to 25p after you’ve met that quota in a fiscal year. Parking, toll fees and congestion charges are included, but speeding tickets are not, and you’ll have to keep the receipt of every journey if you use public transport. Staying briefly in hotels for business trips counts too, but you’ll have to justify it.
Dressed for success
Looking the part comes at a price, but you won’t get a penny of tax spared for typical office gear. The only work clothes that are applicable for tax relief are definable branded items (such as a professional medical uniform) or protective garb that’s necessary for your wellbeing. The criteria on this type of claim is quite strict, so don’t splurge on an eye-popping suit unless you can afford it.
Staying in touch
Communication is key for any independent professional. Telecoms and internet charges, as well as devices such as your laptop and phone, can be accommodated, provided they are primarily used for business and not personal use.
Putting your mobile phone contract as a business expense is agreeable, but hours spent on your home broadband connection won’t count unless the vast majority of your time is spent there.
Thinking about what you genuinely need to work – a coffee shop, for example, can’t function without a coffee machine – will point you in the right direction as to what you can and can’t claim.
Planning for the future
Pensions have seen big reform in the UK since 2014. Putting away your finances into your pension can earn you significant tax relief of up to 45%, making it a smart move for freelancers and contractors planning for the future. So if you’re searching for ways to avoid jumping up a tax band, it may be time to boost your pension pot.
There are numerous ways you can save money on your tax bill, but it’s important to understand what you can and can’t claim as a limited company. Bear in mind that every claim will need evidence to support it, to avoid problems with HMRC later down the line.
For specialist advice on contractor and freelancer expenses, call Bright Ideas Accountancy on 0161 669 4221, or email Info@biaccountancy.com for more information.
