Hi my darling thrifters,
This one goes out to my pal A Girl Who Travels, who recently make me feel like a super smart business bitch for explaining how to do your own taxes and legitimately claim back expenses so your profits are lower and you pay less tax.
This is the best bit of not being PAYE – what you lose in pay-check security…and it’s a big loss… the kind of loss that might keep you up at night if you haven’t done things like save (lol… what is ‘save’?) anyway what you gain from doing your own taxes is you get to claim back expenses.
Basically imagine all the stuff you spent on work before … your house or rent when you work late into the night, your phone bill for all the times your boss calls you out of hours, your travel and food at work… it adds up and when you’re working full time for someone else, you don’t get any of it back.
Some fraudulent tax evaders get away with paying virtually 0 tax, but we’re not a bunch of shysters and also orange is not the new black, so here’s how you claim back stuff you’re entitled to claim back and lower your tax bill so you can spend more on coffee (which is actually also a work expense).
First step – register yourself as a sole trader or LTD. I’ll be talking about how to do this in a different blog because that’s a whole different subject.
Next – Get yourself some bookkeeping software. I use FreeAgent because it’s free with a Natwest Business account. You don’t strictly need a business account if you’re a sole trader, but it makes life a lot easier at the end of the year when you’re trying to work out which Uber trip was actually
Here’s a list of stuff you can claim back. Also – note… you don’t get this money back obvs, it just gets deducted from your profit so that means if you’ve earned £100 and £50 went on expenses, you only pay 20% of the remaining £50. Easy beans!
You can claim back a part of your rent even if you’re living in a house share. Just figure out how much time you realistically spend working from home (40% is reasonable) and add that to your expenses
Same goes for energy bills, broadband, cleaner, basically anything you need for your house to function as an office. I probably wouldn’t put your weekly shop in there because really that’s taking the p*ss a bit, but anything else that’s reasonable.
I spend 99% of my phone time doing work. Most of my friends are also work colleagues, my boyfriend works with me and even my brother calls me for work related stuff (he’s an SEO wizz) so the only calls I get which aren’t about work are from my gran, or my cousin about my gran. I put 100% of my bill as an expense, but if you, unlike me have a life, put in 40% or even 70%. If you have a seperate work-phone, put the whole bill and cost of handset in as an expense.
Cost of your laptop, laptop insurance, and actually if we’re talking insurance, phone insurance (ah that would have been nice to have before that gangly urchin stole mine last night).
Apps or software you use for work
Use lightroom for your professional blog? What it on there! Using Bumble for market research? If it’s legitimate, add it as an expense.
This is a great one. I don’t get how you can’t claim travel cost back when hauling-ass every day for like god knows how many years and paying £150 a month minimum in train fares to work for some corp. The benefit of being free-range is our ranging is expensable (yay!) keep your receipts, preferably print, but if you have it on a bank statement that should be OK, and be prepared to justify why you went to Shoreditch at 2am if you’re claiming that as a business trip.
Note* Uber is also travel. You can claim that shizzle back!
Food & Coffee
Working from a cafe? Expense it! Buying coffee for a client? Expense! When you register for VAT you get to claim that back too. You’d be surprised how much coffee and banana bread one can consume in a year of ‘ranging’ and it comes off your profits, which means less tax. Thanks HMREV!
I’ll talk about why you should think carefully about joining these in a later blog, but those are obviously work expenses. Expense it!
All those books / courses/ coaches you paid for to help you get your business off the ground… Expense!
I actually think that might be it.
Chuck any questions in the comments below, or on Insta – I’m always happy to help freelancers be more thrifty.
Lots of love xx