Tax: we all have to pay it, and very few of us actually enjoy handing money over to HMRC. However, it’s likely that most contractors aren’t taking full advantage of the tax deductions they could benefit from.
Below are five deductibles you should take advantage of if you want to minimise your tax liability.
Home office space
Many contractors and even small businesses run their operations from home, and many more conduct at least some work from a home office. HMRC guidelines suggest just over £200 a year can be claimed if home space is used for minor filing duties.
However, if you’ve converted one of your bedrooms into an office and you work from home for the majority of your working week, you could potentially claim as much as one third of the interest payments on your mortgage, as well as utility and other essential bills.
It isn’t just the space and utilities you use either. Office equipment can range from the desk you sit at and the chair you sit on, to the computer and printer you use.
Ensure invoices are completed in your business name and keep a paper trail of all your payments and receipts. Be prepared to show them to the tax man if need be, but don’t be afraid to claim for equipment if you use it solely for business.
Travel costs can prove extensive, especially if you have to endure a long commute on a regular basis.
You can claim a reasonably handsome mileage allowance when using your car, or all of your rail fares when travelling by train to visit clients. You can even claim a mileage allowance if you travel by bicycle.
Training and membership costs
Almost any subscription, membership, or training cost can be included as tax deductible, as long as you can show it’s work-related.
Training courses are considered a work expense. Trade body memberships and subscriptions to trade journals or industry magazines can also be added to your ever-expanding list of tax deductible expenses.
Even the Christmas party
If you’re a sole trader or freelancer, it’s unlikely you’ll have your own Christmas party. However, if you run a business and have employees, the Christmas party can be included as a tax deductible expense – as long as it doesn’t cost more than £150 per person.