Simple ways for freelancers to be tax efficient

 In Contractors & Freelancers

One of the great advantages of freelancing is the ability to claim back expenses. For example, let’s say you earn £30,000 but claim £5,000 in allowable expenses. You’ll only pay tax on £25,000 which is classed as your ‘taxable profit.’

Expenses can include things such as: 

  • Office equipment: Purchases such as desks, stationery, or laptops can be claimed if you can show they were for work purposes. 
  • Travel costs: Fuel, train or bus fares can be claimed for all work-related travel expenses. 
  • Staff costs: If you’ve subcontracted work out to other freelancers, this can be added to your expenses. 
  • Advertising or marketing: For example, if you’ve spent money on a website, you’ll be able to claim it back.  
  • Costs of your business premises: Office rent, heating and lighting can all be classed as expenses. 

Things get a little more complex if you’re working from home. If you’re renting, you should be able to claim a portion of your rent back as an expense. How much will depend on how long you spend working in your home and how much of the home is taken up by work. 

According to HMRC, you must apportion the running costs of your home on a ‘fair and reasonable’ basis between the private element of that cost and the part which relates to you living there. There are several ways to calculate this and an accountant can help you determine how much you should be claiming. 

Donate to charity 

If you’re paying the higher rate of 40%, you can add charity donations to your tax return to reduce your tax bill and claim extra tax relief. So, if you’ve sponsored a friend to run a marathon or given money to a cause through Just Giving, you’ll be able to use this to claim relief. 


If your business is growing, it may be worth setting up as a company to reduce your tax obligations. 

You’ll have to set yourself up as a limited company, for which you’ll be classed as a director. HMRC will allow you to draw a certain part of your earnings as dividends. For basic rate taxpayers (0 to £34,500), this is taxed at 7.5%. 

This allows you to reduce your salary to a lower tax bracket and claim the rest as dividends, thereby reducing the amount of tax you pay. 

Get help with self-assessment

In the early days, you might handle your tax issues yourself, but this can be a false economy. Adopting accounting software gives you more visibility over your finances, and helps you understand what you can and can’t claim. 

Alternatively, hiring an accountancy firm to handle your self-assessment will not only help you get rid of one of the more unpleasant duties of any freelancer, that expert eye may also help you to unlock all sorts of savings. A penny saved is a penny earned, so they say, which is why it pays to take a closer look at your finances when the times comes to filling out that tax return. To find out more about our self-assessment services and monthly packages, why not get in touch for a friendly chat.

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