Tax 101

Tax for small businesses-Transitioning into full-time or part-time freelancing can provide flexibility and an additional income source. However, managing taxes can become complex. Without tax withholding, it becomes your responsibility to estimate and pay taxes.

Underestimating your taxation obligations during the year might lead to owed taxes when it’s time. Nevertheless, freelancers can leverage various tax deductions to lessen their taxation liability.

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What Are Freelancer Taxation Deductions?

Freelancers and independent contractors have the opportunity to deduct specific business-related expenses from their income, reducing their tax obligations. You don’t need to operate a full-scale business to be eligible for these deductions.

For instance, food delivery platforms like Uber often classify their drivers as independent contractors. Consequently, even part-time drivers working in the gig economy can potentially deduct expenses such as fuel, vehicle maintenance, phone services, and more.

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Top Taxation Deductions For Freelancers

Let’s delve into the various, key deductible expenses for freelancers:

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1. Advertising, Marketing and Internet expenses for taxation

You may be able to deduct expenses related to running ads, designing and maintaining your website, and getting a stable internet connection to allow such activities as long as these costs are essential for your business.

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2. Taxation and Office and Work Supplies

You can potentially deduct the expenses related to office supplies and equipment, including items like laptops, printers, books, and more. You have the option to either deduct the entire cost of the equipment upfront or depreciate a larger asset, such as a computer, and claim those expenses gradually over time.

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3. Car Costs

Freelancers can potentially deduct expenses related to a vehicle used for business purposes. These expenses can include depreciation, lease payments, gasoline, tires, insurance, and registration fees.

However, there’s a catch: If you use your car for both personal and business reasons, you’ll need to determine the percentage of use that’s strictly for business purposes. HMRC only allows deductions for business-related expenses.You generally have two options to deduct vehicle expenses:

• The standard mileage rate (which is 45p per mile driven for business 2023) or;
• Actual documented expenses.

If both methods are applicable to your situation, choose the one that provides the better Taxation deduction for you.

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4. Business and Health Insurance

You can potentially deduct premiums for various types of insurance related to your business, such as liability or malpractice insurance. If you’re self-employed and meet specific criteria, you might also be eligible to deduct health insurance premiums for yourself, your spouse, and your dependents.

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5. Business memberships 

While you can’t extract fees for memberships at places like country clubs or recreation centers, you may be able to deduct memberships in corporations like your local chamber of commerce, professional groups, or trade associations. These memberships might qualify for a tax deduction.

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6.Education Expenses

You can potentially deduct expenses for courses and education related to your business. If you travel for classes or conferences, those travel costs might also be deductible. However, you must be able to show that this education either helps you improve your skills or is legally required to stay in your profession.

For instance, a Certified Public Accountant (CPA) can deduct the cost of continuing professional education (CPE) courses because they are necessary to maintain their CPA license.

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7. Legal and professional fees

If you hire a legal expert to assist with tasks like trademark registration or drafting freelancer contracts, you can likely deduct their fees. Additionally, the expenses related to accounting and bookkeeping services may also be eligible for deduction.

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8. Home office expenses

If you have a specific area in your home that you consistently and exclusively use for your business activities, you may qualify for the home office deduction. This deduction can be especially beneficial if you’ve designated a spare room or other space in your home for your business needs.

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How to claim tax deductions as a freelancer?

1. Maintain detailed records of income and expenses, including receipts. 

2. Identify allowable expenses and calculate the business portion of mixed expenses. 

3. Include deductible expenses in your Self-Assessment Taxation return and consider professional advice if needed.

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Tips for freelancer tax deductions

Whether you’re new to deducting freelancer expenses or simply want to ensure you’ve covered everything, these tax tips can help.

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‍Keeping records of your expenses

Maintain organized records and securely store receipts for your expenses to serve as backup for each deduction you claim. Failing to provide proper documentation for a business expense during an audit could potentially lead to unnecessary Taxation liabilities.

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Set up separate bank and credit card accounts

Consider creating separate bank and credit card accounts for your business and personal finances. This separation simplifies tracking transactions and avoids confusion between personal and business expenses.

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Get Tax help when you need it

Getting professional Taxation assistance might involve some upfront costs, but remember that you can potentially deduct these expenses when you file your next Taxation return. Managing your taxes as a freelancer can be quite challenging, especially when you have various clients and projects to handle. Hiring a tax professional can simplify the process and ensure you correctly navigate the specific tax forms relevant to freelancers.

Get in touch with Cangaf Accountancy asap to get you all sorted out  for your claim.  Contact us today for a free, no-obligation quote, and let us help you with all your accountant needs

More links!

Taxation Research UK by Richard Murphy
A widely-read blog offering critical commentary on UK Taxation policy, economic justice, and HMRC practices.
Visit Tax Research UK Blog​

ICAEW Tax News
The Institute of Chartered Accountants in England and Wales provides weekly updates on Taxation developments, including PAYE, VAT, and HMRC guidance.
Explore ICAEW Tax News​

KPMG Taxation Matters Digest
A fortnightly newsletter covering the latest Taxation issues, government announcements, and insights for businesses and individuals.
Read KPMG’s Tax Matters Digest​

Chartered Institute of Taxation (CIOT) Blog
Offers detailed coverage of Taxation legislation, parliamentary debates, and policy changes.
Visit CIOT Blog​

Taxation.co.uk News
Provides timely updates on HMRC policy changes, Taxation compliance issues, and professional commentary on various tax topics.
Check out Taxation.co.uk News​