One of the simplest ways to slash your tax bill as a contractor is to ensure you are claiming all allowable business expenses. But where does one end and the other begin?
What are “allowable expenses”?
As a general rule, an expense must be incurred **“wholly and exclusively”** for business purposes. This means any that could be construed as having a personal element are liable to be queried by HMRC. It’s important therefore to keep accurate records, and to take advice where necessary.
Common contractor expenses
Subscriptions and accountancy fees – professional memberships, software and support.
Office equipment and training – tools, computers, and training that relate directly to your trade.
Pension contributions – a tax-efficient way to save for retirement.
Mobile phones – if the contract is in the company’s name.
Use of home as office – claim either a flat rate (£6 per week) or a proportion of actual household bills.
Trivial benefits – small gifts worth £50 or less, up to 6 times per year for directors.
Staff entertainment – deductible up to £150 per head for annual events like Christmas or summer parties.
Mileage and travel costs – 45p per mile for the first 10,000 miles, then 25p thereafter.
Meals at temporary work locations – allowable where the assignment meets HMRC’s temporary workplace rules.
Why it matters
Claiming the right expenses can save you thousands each year while ensuring your business remains compliant. The key is knowing where the line is drawn — and having the right support to make sure you don’t cross it.
