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We don’t need to tell you about the benefits of working for yourself – they’ve been doing the rounds for years. Of course, the big difference nowadays is that more and more of us are taking this approach.
Again, the purposes of this article aren’t to dissect the reasons behind this (although the general consensus is that the internet is largely to thank). Instead, today’s guide is all about one of the more mundane elements of working for yourself – the dreaded T-word (‘tax’, for those unaware). Or, in more specific terms, the various expenses you are allowed to file as you make yourself into the world of self-employment.
Bearing this in mind, let’s take a look at some of the key questions that are commonly asked when it comes to this topic.
Do you need to claim for expenses?
First and foremost, it’s worth asking yourself if you actually need to claim for expenses. This question might raise a few eyebrows, but give us time.
There is a little-known-law called the trading and property allowance. Put simply, this allows anyone to make £1,000 profit a year, tax free. It’s also worth mentioning that this isn’t just tax free, but it’s also something that you don’t have to declare. It means that your paperwork has been immediately cut down.
Of course, £1,000 is only a small amount of money and ultimately, this benefit isn’t going to apply to a huge number of you. We should also point out that you can’t claim expenses if you are taking advantage of this tax benefit – so this is something else to be aware of.
What can you claim for?
So, what exactly can you claim for?
There are a lot of misconceptions regarding this, and in truth, it’s probably worth consulting a service like https://www.3wisebears.co.uk/services/freelancer-accountants/ to help you along your way.
However, to provide a general overview, there are a few pointers. Contrary to popular belief, filing expenses isn’t about funding a 5-star trip abroad. This won’t be allowed by the tax authorities and there are some strict guidelines on what you can and can’t deduct for. In the case of a trip abroad, this is something that would only be allowed for business – and travelling first class or in hugely expensive hotels just isn’t going to be possible. There are many great online tools available to make this process easier.
Then, there are the day-to-day expenses. These include anything from your home office, which can be up to £26/month, right the way to the cost of the internet. However, in relation to the latter, this must be calculated as a percentage as your business use. So, if you use your internet for half personal, half business – only 50% of the cost is allowed as an expense.
How can you claim them?
This final point is quite a simple one to cover and is made all the easier if you turn to a specialist accountant as we have already mentioned.
Generally, you have two options; file your expenses on your annual return by paper, or via the online method. The latter is unsurprisingly the most common method nowadays, and also provides you with a little more flexibility in relation to deadlines.
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