Valid expenses as a contractor – what you can claim
When you are a freelance contractor you will incur certain costs. Some of these can be claimed before taxes are applied – i.e. they are ‘tax-deductible’. It is therefore important that as a contractor, you know what counts as a valid expense, so you can keep your tax bill as low as possible.
In this article, we explain the expenses you are allowed to claim. Are expenses rules different between a limited company and an umbrella scheme?
It is important to realise that whether an expense is valid or not is not affected by your decision to operate through your own limited company or an umbrella company. The same tax rules for expense allowability apply to everyone regardless of the payment structure used. The number of allowable expenses you can claim will depend to a large extent on your IR35 status. The list of valid expenses you can claim is longer if you are working on contracts which are outside the scope of IR35. What are valid contractor expenses outside of IR35? The expenses allowable for a contract not caught by IR35 would be as follows: The number of allowable expenses you can claim will depend to a large extent on your IR35 status
- Travel expenses.
- Motor expenses (mileage claims if the car is personally owned).
- Accommodation and subsistence.
- Telephone and business call only.
- Books, magazines, subscriptions and courses – were related to business and your contract work.
- Bank charges and interest – on your company bank account.
- Pension scheme – where paid by the company to an HMRC approved the scheme.
- Business insurances – professional indemnity, business contents and other business-related insurances.
- Life Insurance – using a Relevant Life Plan (RLP) – find out more about these.
- VAT on expenses if your company is VAT registered.
- Computer costs.
- Accountancy costs – if using a Limited Company.