by Anita Forrest
Tax write-offs are one of the best parts of being self-employed but it’s also one of the most confusing areas with many missing out on valuable deductions.
So, if you’re freaking out every time you get a tax bill or just not claiming expenses because you can’t decide whether you are entitled to claim them, then read on. I’ll show you 5 tax write-offs that you may be entitled to:
If you are using your mobile phone for work reasons like checking emails, getting social for your business and marketing apps then you can claim back a percentage of your line rental against your taxes.
There’s no hard and fast rule here, the percentage you can claim will depend on the amount of time you use your phone for work.
Top tip – don’t write off 100% unless you use it exclusively for business.
Some of the money you spend on business travel can be claimed against your taxes. But this largely depends on where you travel to and why.
Travel outside of your normal routine will generally be deductible in full. But regular travel, like between your home and office cannot be claimed, that’s because HMRC defines travel between your home and your regular, permanent place of work as a non-work journey.
If you are out and about you can claim for meals that you pay for when you meet other people like clients or colleagues.
You can claim for meals when you are travelling for work reasons (known as subsistence), but not your everyday lunches. Just keep the cost of anything you claim ‘reasonable’, like a sandwich, drink and the odd glass of wine.
Training and courses
Staying on top of your game is essential when you work for yourself, but it can be pricey. You’ll be able to write off the cost of training and courses that keep your existing skills and expertise. HMRC recognises that you need to undertake training as part of carrying out your trade to keep your knowledge up to date. But if you attend training to learn new skills these costs would not be tax-deductible.
These rules also apply to books, eBooks, workshops and magazines.
If you’re working from home, then it’s costing you money in the form of extra utilities, cleaning and more. Now, don’t get too excited! HMRC has a lot of rules around what you can claim and how.
There are two ways you can choose to make your home office claim: the flat rate method (most popular) or the actual method.
The flat rate method – If you are working from home for at least 25 hours per month, then you can claim a flat rate allowance on your taxes. The 2020/21 tax year allowances are:
- £10 per month if you work between 25 and 50 hours per month;
- £18 per month if you work between 51 and 100 hours per month;
- £26 per month if you work 101 or more hours per month.
You don’t need to keep any receipts, which makes this easy to claim when you fill out your tax return. But the downside is that it isn’t the most generous tax deduction.
The actual method – depending on your situation it may work out more tax efficient to claim a percentage of your actual household bills (like heating, electricity, rent and cleaning) as a business expense. You’ll need to add up the number of rooms in your home and the time you spend working in each, then claim a portion of your bills. And don’t forget to keep receipts to back up your claim!
Claiming business expenses is by far the easiest way for you to reduce your tax bill, just make sure you keep hold of all your receipts as evidence of what you are claiming. If you are ever unclear about what expenses you can and can’t claim, keep track of it, save the receipt and speak to a professional.
Anita Forrest is a Chartered Accountant, spreadsheet geek, money nerd and creator of www.goselfemployed.co – a UK small business finance blog where she shares help and advice with the self-employed community to make topics like registering a business, bookkeeping and taxes easy to understand.