As a freelancer, you can claim tax relief on some of your business expenses. However, this must be done within 4 years of the end of the tax year related to these expenses. Here is a quick guide on what you can claim tax relief on each year.
Eligibility
In order to claim tax relief:
- You must have paid tax in the year – tax relief is based on what you’ve spent as well as the tax rate you pay
- You must keep records for some claims
- Your employer cannot reimburse or provide you with alternatives for any purchases you’ve made
If your claim is for:
- The current tax year: HMRC will make any necessary adjustments through your tax code
- Previous tax years: HMRC will make adjustments through your tax code or give you a tax refund
Check if you’re eligible to claim here.
Working from home
If you’re working from home on a regular basis, you can only claim tax relief for additional household costs. This includes:
- Gas
- Electricity
- Metered water
- Phone calls related to work
- Dial-up internet
Note that:
- You can’t claim tax relief if you choose to work from home
- You can’t claim for the entire bill, only what you use for work
How much you can claim
From April 6, 2020 you can claim £6 a week without providing evidence of extra costs. Let’s say you pay the 20% basic tax rate and claim £6 a week: You’re able to claim 20% of £6 (£1.20) per week in tax relief. However, if you have incurred extra costs above the weekly amount, you would need receipts, bills and contracts as evidence.
Uniforms and small tools
While you can’t claim tax relief on the initial costs of uniform and small tools, you can claim it on:
- The cost of repairing/replacing small tools needed for the job (e.g. scissors, electric drill)
- The cost of maintaining specialist clothing (e.g. uniform, safety boots)
You can’t claim relief for personal protective equipment (PPE). Your employer should either provide you with free PPE or reimburse you for buying it.
How much you can claim
- The actual amount you’ve spent (if you have receipts)
- The flat rate expense/deduction
Vehicles
You can claim tax relief on the vehicles you use for work. This does not cover your travel to and from work, unless you’re working there temporarily.
How much you can claim depends on:
- Whether you’re using a vehicle bought or leased with your own money
- Whether you’re using a vehicle bought or leased by your employer
If you’re using your own vehicle for work
You could claim tax relief on the approved mileage rate which covers the cost of owning and running the vehicle.
You can’t make separate claims for:
- Fuel
- Electricity
- Road tax
- MOTs
- Repairs
To find out how much you can claim in each tax year:
- Keep records of your work journeys i.e. dates, mileage
- Add up the mileage for each vehicle type you’ve used
- Deduct how much your employer pays towards your costs (mileage allowance)
If you use a company car for business, you can claim tax relief on the amount you’ve spent on fuel and electricity. Make sure you keep records of the exact costs. Your employer may reimburse some of the money, but you can still claim relief on the difference.
Memberships fees and annual subscriptions
You can claim tax relief on:
- Professional membership fees, if you need to make payments to do your job
- Annual subscriptions for approved professional bodies and learned societies, if membership is required to do your job
These organisations will tell you how much tax you can claim back.
You can’t claim tax relief on fees or subscriptions if you:
- Haven’t paid for them yourself
- Have paid organisations that aren’t approved by HMRC
Travel expenses
If you’re required to travel for work, you could claim tax relief on food and overnight expenses. Again, you can only claim for travelling to and from work if it’s a temporary place.
You can claim tax relief on:
- Public transport
- Hotel accommodation for overnight stays
- Food and drink
- Congestion charges and tolls
- Parking fees
- Phone calls related to work and printing costs
- Business mileage
Other equipment
You could claim tax relief on the full cost of substantial equipment you need for work. Things like computers qualify for annual investment allowance – a type of capital allowance. Though you could claim for business mileage and fuel costs, you can’t claim capital allowance for the actual vehicle.
You can only claim tax relief if:
- The equipment is needed to do your job
- You only use it for work i.e. no significant private use
If your employer helps pay towards the item, the amount of tax relief you can claim is reduced.
As a freelancer, it’s important to plan ahead for each tax year. You want to avoid paying too much tax and claim tax relief on expenses, if possible. For more information on how to start your tax year right, visit our blog.