- Income Tax
While freelancing offers flexibility to those looking for a work-life balance, it also comes with some responsibilities. Currently, approximately two million people are working as freelancers in the United Kingdom. So, if you are also one among them, it is time to know that you need to understand the intricacies if the UK tax system so that you can make the most of the essential tax deductions available for UK freelancers. This will not only help you to save some of your hard-earned money but will also help you to optimize your finances. So, let’s look at the essential tax deductions for UK freelancers.
Home Office Expenses
As a freelancer, you are most likely working from a dedicated space of your home. Hence, you can deduct home office expenses, provided these expenses are solely used for business purposes. You can calculate these expenses by either opting for the simplified method or for the actual expenses method. These home office expenses are rent, mortgage interest, energy bills, council tax, and more. This will help you to have a dedicate workspace without bearing the financial burden of its maintenance.
If you are required to attend business or client meetings, you may have to travel frequently. However, you don’t need to worry about the expenses. You can deduct these expenses from your taxable income. These include any transportation cost for taking a taxi, bus, flight or train, accommodation cost for an overnight stay in some hotel or resort, cost of meals related to your travel for work purpose, etc. The best part is that you can deduct the parking fees incurred during business travel.
Equipment and Supplies Expense
It is not uncommon for freelancers to invest in equipment such as computers, printers, phone, and more so that they can do their freelancing work. All these expenses are tax deductible if they are exclusively used for business purpose. These expenses may also include the cost of any software licence or furniture such as desk, chair or cabinets. If you are buying stationery supplies like pen, paper, or folders for your freelance work, you can also include them under these expenses.
Training Course Expenses
Whether you’re working as a freelance web developer or a photographer, learning new skills or enhancing your existing skills can help you as a freelancer. For the same, you have to enrol in training courses or attend workshops, seminars and conferences, which involve cost. All these expenses appear to be a financial burden, but you will not believe that these are also deductible expenses for UK freelancers.
Apart from these, there are also some expenses, such as the expenses you have incurred to advertise your freelancing business to attract new clients. This may be investment in brochure, flyers, social media campaign, etc. However, it is vital to note that you must maintain accurate records about all these expenses to claim them as essential tax deductions. Moreover, the tax rules and regulations can change anytime. So, it is best to consult a UK-based accountant who can help you in record-keeping and maximize your deductions.