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Top 10 Expenses You Should Claim From Your Tax as a Freelancer Trading as a Sole Trader in the UK

Oct 31, 2022 | UK Accounting

Even if you are a freelancer trader, there are still expenses you can claim from your tax. To know more about them, continue reading this blog.

Taxes for Freelancers: Top 10 Expenses You Should Claim From Your Tax as a Freelancer Trading as a Sole Trader in the UK

In the United Kingdom (U.K.), it is common for sole traders to equally be freelancers or contractors. As such, they are required to pay taxes on their incomes and earnings. This is not the case if you are a limited liability company. As such, you are required to measure and know what you owe to her Majesty’s Revenues and Customs (HMRC). 

At Sterlinx Global, we support sole traders in paying their fair share of taxes and abiding by current HMRC legislation to avoid taxes. In this article, we show key tips for reducing your tax bill if you’re self-employed. We equally illustrate what other items you can claim from your VAT tax returns. 

Sole Trader In The Uk
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You can deduct some expenses from your VAT returns

While HMRC taxes some revenues and profits as a sole trader, there are some expenses that you can deduct from your final VAT bills, such as transport, software, and Internet-related expenses. Sole traders can claim back such expenses as they are considered necessary and value-added activities by HMRC. 

As such, most of the costs directly related to the work you do (such as travel, transportation, and bills) can be legally deducted when calculating your gross income and how much tax you are required to pay. Such expenses are generally called “tax deductible”.

1. Office Supplies

If you are a freelancer trading as a sole trader, you are allowed to claim back VAT on office supplies such as stationery, printing costs, ink, postage, phone, and other items that are required to complete the job effectively. 

2. Equipment for the office 

You are allowed to claim expenses for equipment such as computers, software, and hardware that have been used for over two years, provided you use cash-based accounting. However, if you use accrual-based accounting, you will need to claim capital allowance instead. 

3. Business premises

Expenses you can claim on your business premises include items such as rent, business rates, utilities, buildings insurance, and maintenance repair as well as security costs. Remember that if you purchase your premise, you are not allowed to reclaim any costs as part of the allowable expenses. 

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4. Transport

Any transport that was undertaken during the job can be reclaimed, but this does not include transport to and from work. If a journey was made for business purposes, then you can reclaim these from your VAT returns. For freelancers trading as sole traders, this is important as they may not always have a fixed location. 

5. Legal and other professional costs

Any professional services such as accountants and lawyers should be deducted from your final tax bill. These are significant costs for sole traders and can be deducted according to HMRC. 

6. Raw materials/stock

According to HMRC, you are allowed to claim raw materials on the stock that is used to make your products or service. The nature of stock may differ from one sole trader to another, but HMRC allows you to reclaim any stock-related expenses. 

7. Marketing and advertising costs 

A majority of your marketing or advertising costs can be accounted for as an allowable expense. This includes social media marketing, offline marketing, and other related materials that are used to promote your business. 

8. Professional Insurance

In some jobs, you are required by law to possess professional insurance. For example, public liability insurance, travel insurance, or even indemnity insurance as a professional. HMRC allows you to claim these as an allowable expense.

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9. Uniforms or clothing 

As a freelancer, any special uniforms or clothes that are needed to complete or execute your job are tax-deductible. This is the case for construction workers, chefs who work as sole traders, and other professions that require specialist uniforms. 

10. Trade subscriptions

If you are a part of membership bodies, you can deduct this from your final tax bill. This is especially the case if such subscriptions are indispensable to performing your job. 

Here is a list of recently asked questions about the Top 10 expenses you should claim from your tax as a freelancer trading as a sole trader in the UK

  • What expenses can I claim if I have a home office?

    If your home is equally your office, as is the case for many freelancers, you can claim expenses such as heating, council tax, and internet costs. However, the portion of utilities you claim will have to be proportional to the space your office occupies. 

  • Is there a tax-free trading allowance from HMRC?

    This is an amount for those who are self-employed but earn £1,000 a year or less. Such employees are not liable to pay any tax to HMRC. However, if you incur high costs or can say your income changes dramatically, it is not a bad idea to register with HMRC anyway. 

  • What are the various tax bands in the UK? 

    As a sole trader, all the profits made by your business belong to you personally. Consequently, any profits you make as a sole trader will be taxed alongside business profits as the HMRC considers them the same. Taxes on profits as a sole trader will generally be added to your income and jointly assessed by HMRC. England and Wales have a personal allowance of up to £12,570, with a 20% basic rate for freelancers earning between (£12,571–50,270) and 40% ( £50,271–150,000).

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Conclusion

At Sterlinx Global, we believe sole traders who may be e-commerce traders or other types of traders should leverage all the allowances they can get from HMRC. Not only does this save costs, but it also creates an opportunity for you to run a successful business. 

Taxes for freelancers do not need to be complicated, and we provide a guide on how to save on your tax bill. Freelancer tax is important and can save you significant costs and fines in the future if properly handled. Contact one of our experts who can help you navigate your taxes and stay up to date with changes in the regulation. 

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