What Can I Claim on Contractor Expenses?

There are many reasons why people choose to become self-employed, not only do you have more freedom and flexibility than a permanent worker, but you also have the opportunity to benefit more financially.

The financial side of being a contractor is very appealing to most people, this is due to the fact that an average freelancer rate can easily be double that of a full time employee, you’re free to work as much overtime as you like and are entitled to claim for contractor expenses.

Contractor Expenses Explained

When you make a claim for any expenses that you have made, you will only get taxed for your profits, with the amount spent on your business remaining tax free. Put simply, the higher your expenses, the lower your tax bill.

However, in order to claim back your contractor expenses they must be a cost that was made for the running of your business. If not you could see yourself being asked to provide evidence by HM Revenue and Customs.

Therefore it is important that you keep hold of any receipts for the expenses you wish to claim. When you complete your tax return at the end of the year, you will need to declare all your income and expenses.

Types of Expenses

Here are some examples of the most common expenses you can claim as a contractor:

• Any business travel – if you have a car then you would calculate this expense by adding up the miles used for business, the cost of running the car, insurance and any payments made buying the car.
• Accountancy fees, which includes your limited company formation
• Employers NI contributions
• Contributions to an Executive pension plan
• Training
• The rent, heating and lighting of your business premises
• Work equipment
• Advertising
• Computer software
• Business telephone calls
• Business ‘entertainment’
• Stationary and postage for work
• Books and magazines that are relevant to your business
• Bank charges on business accounts
• Meal allowance, which can be claimed when working on a remote site.

If, however, your contract is caught by IR35 then you should still record and receipt all business expenses, even though the only expenses you can claim are:

• Administration expenses which are fixed at 5% of your contract income
• Travel and accommodation expenses
• Pension contributions
• Certain professional subscriptions.

If you have any queries regarding expenses, then it’s best to seek professional advice from a contractor accountant. You can then have the reassurance that you are being given the best advice and guidance with your finances.