Our Payment Solutions
A Guide to Expenses
What Expenses Can I Claim as a Contractor?
As a self-employed contractor, IR35 is an important piece of tax legislation to be aware of.
Working as a Contractor is a great way to have the flexibility of choosing when and where to work. Another benefit with working in the contracting world is that generally you are being paid at a higher rate than those who are permanent employees. As a Contract worker, you can also maximise your take-home pay by claiming back expenses often as tax relief. This often sparks a little confusion as to what you can actually claim for ?!…..So we thought we would break it down for you!
First things first…
What is your current employment status?
PAYE Umbrella Worker
Working under PAYE Umbrella means that you as ‘the contractor’ become an employee of the umbrella company. This means that all tax and NI is calculated and deducted by the umbrella company prior to you receiving your money. This means you do not need to worry about calculating your tax and expenses are generally processed on a weekly basis.
What expenses can I claim under PAYE?
You can only claim the cost of travel from site to site and not from home to place of work. This allowance is generally calculated at 45p per mile.
Food and drink
Being a PAYE employee you are not allowed to claim for the cost of lunches or any refreshments.
The cost of a hotel can be claimed as an expense as can the reasonable cost of additional meals taken in conjunction with overnight accommodation. There are no set allowances for accommodation but the cost must be deemed to be 'reasonable'.
You are classed as a self-employed worker if you work for yourself rather than being “employed” by a business or umbrella company. Being self-employed means that you do unfortunately miss out on the “employee benefits” such as holiday pay, sick pay etc. HMRC have to be notified that are you working on a self-employed basis and once verified you are usually issued with a UTR number. Self-employed workers also have to put money aside for NI & Tax contributions. When you complete your end of year tax return you can then claim back any expenses you have had throughout the year.
What expenses can I claim under Self Employment status?
Working self-employed broadens the borders of what you can claim back on expenses as long as it’s purely business related. Holding a self-employed status entitles you to the following:
Any Travel Allowance for business purpose – 45p per mile up to 10,000 per year, 25p thereafter.
Accommodation – This works the same as PAYE, you can claim back any accommodation costs including food and drinks during your stay.
Additional Training – This is only allowable if the course is within the sector you currently work in.
Phone Bill – As long as you can prove this is solely a business phone then this is also claimable!
Pretty much anything that is business related can be claimed back in tax relief (lowering the amount of tax you pay at the end of each year). You must remember to keep hold of all your receipts as HMRC may ask for them as proof of your purchases. If you need assistance with your end of year tax return please visit Futurelink Accountancy services - Chartered Accountants.
Futurelink also offers many different solutions including both PAYE Umbrella & Self- Employed (CIS, GPS, Limited Company) payment solutions for contract workers across many sectors.
If you would like to discuss please call us on 01923 277900 or email us at firstname.lastname@example.org. Alternatively, please leave your details below by clicking the button below.