If you are Self-employed, either as a Limited Company, a Sole Trader or working through an Umbrella Company, you can claim money back on expenses - but what can be reimbursed?
Our infographic will outline typical expenses incurred by a self-employed professional over the course of a month and will give insightful hints into what can be claimed to reduce your monthly taxable income.
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What expenses can I claim back as a Self-employed Professional?
If you are self employed, either as a Limited Company, a Sole Trader or through an Umbrella Company, you can claim money back on legitimate expenses to minimise your tax bill - but what can be reimbursed?
Take a look at James' typical outgoings and see where you could make savings too.
Remember! Evidence is crucial when claiming expenses, as HMRC may ask you for this information. The best way to be safe, is by keeping original receipts.
Business mileage* or fuel**
James uses his car for business purposes. He can claim back 45p a mile for the first 10,000 miles and 25p per mile after that.
James travels 40 miles per day over 20 working days travelling to and from his place of work. £360 per month
You can also claim money back on other forms of transport, even cycling. For every mile you travel, you can get 20p.
This could include breakfast, lunch and dinner. James can claim the cost of food and drink on a business trip, providing he keeps his receipts.
James spends £5 per day over 20 working days. £100 per month
When working through an Umbrella Company dispensation rules will apply and will vary with each provider. Typically, if you work more than 5 hours per day, you can claim up to £5 and up to £10 if you work 10 hours or more each day.
This could include train travel, toll road charges, air travel and more if you have to travel relating to your business.
Return train travel from Manchester to London plus an Anytime Travelcard in the capital. £80 + £16.40
James stays in a hotel overnight, plus has breakfast and a drink. £115
As well as the cost of accommodation and meals while you are away on your business trip, you can also claim a further £5 for personal incidental expenses - e.g. telephone calls or newspapers.
Don't forget the small stuff! If you have a coffee - make a claim.
James' mobile phone is in his Limited Company's business name, so he can claim all line rental and call charges.
If you are a sole trader or the phone contract is in your name, you can only claim calls relating to business usage. As well as claiming for your mobile phone, you can also claim a proportion of landline costs, based on business use.
James uses a smartphone to keep in contact with his clients via calls and emails. £55 per month
You can claim the cost of work-related training courses, providing that they are essential to the job or required by your client.
James attends an IT course specific to the software that his client is using. £129
Accountancy, Insurance and Other Professional Fees/Margin
You can also reduce your tax bill by getting relief on any accountancy, legal, insurance or professional subscription fees that you pay.
When working through an Umbrella Company, insurance is included in the margin.
James is an IT professional and each year he pays £118 for membership of the Chartered Institute of IT. £9.83 per month
James uses an accountant and has insurance. £125 per month + £34 per month
Brookson can take the hassle out of claiming expenses
James simply submits his claim via our website by scanning in his expenses.
- The service can be used on the go, via a tablet or smartphone.
- Photos of your receipts are securely stored in Connect for up to 8 years.
Connect is a unique online portal for Brookson members, which delivers an updated financial position of your business, giving you the information you need, when you need it, 24/7.
- Hassle-free money management
- Better way of managing your finances
- Updated financial information
Monthly reduction in taxable income: £1024.23
- Your monthly total expenses reduce the amount of taxable income. This means your take home pay increases, but you will have had to pay out in the first place to be able to make the claim.
- For example, James' £115 claim for accommodation would reduce his taxable income by £115 - but he would have paid out the same amount in the first place.
- Get into a routine of submitting and logging your expenses regularly to keep an up-to-date view of your financial position.
- If you are claiming VAT on expenses, then a VAT receipt is required as proof of purchase.
- Umbrella expenses must be wholly exclusively and necessarily in the performance of your employment duties.
* If the contact is longer than 24 months, you are unable to claim expenses. This rule does not apply for Sole Traders.
** As a Sole Trader, you can claim based on the actual cost of fuel. This is useful when fuel prices are rising, but may create an extra administrative burden because you will need to deduct the proportion of personal use and keep all receipts.