Being able to claim back on contractor expenses is one of the main financial benefits to working as a contractor.
The higher your expenses the lower your tax bill; this is because when you make a claim you will only get taxed for your profits, with the amount spent on your business remaining tax-free.
What Can I Claim?
Some people can find expenses a bit confusing when it comes to what you can or cannot claim for. The main rule is that the claim must be a cost that was made wholly and exclusively for the purposes of your business.
It is important that you keep hold of any receipts for the expenses you wish to claim back, so that when you complete your tax return at the end of the year, you can declare all your income and 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
- The rent, heating and lighting of your business premises
- Work equipment
- 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.
What Can’t I Claim?
- Training courses not specific to your trade
- The cost of a degree
- Private school fees
- Clothing – unless it is a specific type of work uniform, such as a lab coat.
- Meal allowance – unless you are working at a remote site away from your normal place of work, or when staying away from home overnight, but daily, round sum claims for meals are not permitted.
- Parking fines or speeding tickets
- Certain accommodation costs – the cost of hotel or bed and breakfast can be claimed as an expense, however, the cost must be deemed to be ‘reasonable’
- Anything you don’t have a receipt for.
If you have any queries regarding expenses, or any other financial questions, such as contractor take home pay, Corporation tax, or IR35; then it’s always best to seek professional advice from a contractor accountant.