Freelancers should take note of the simplified expenses regime

Of all of the recent developments that the clients of Freelancer Accounting’s (http://www.freelanceraccounting.com) accountants for freelancers should take note of, the greatest is surely the simplified expenses regime that is now in place. There are certain business costs that freelancers can deduct from their income to calculate their taxable profit, which in practice amounts to their allowable expenses lowering their income tax. The newly simplified regime enables the use of flat rates, removing the need to figure out your actual business expenses, which can involve more complicated calculations.

The new regime replaces the non-statutory deductions that could previously be claimed for business mileage, board and lodgings or use of home. Simplified expenses can only be used by sole traders and business partnerships, with limited companies and limited liability partnerships excluded. The new regime enables those freelancers using our accountancy services to calculate their allowable vehicle expenditure using a mileage-based flat rate – for cars and goods vehicles, 45p per mile for the first 10,000 miles and 25p per mile thereafter. Motorcycles are subject to a rate of 24p per mile. Businesses that have opted to use the scheme for a vehicle must continue to do so for the duration of that vehicle’s time with the business. You are not able to use the scheme, should capital allowances have already been claimed in respect of that vehicle.

Clients of our accountants in Reading also have the option to claim relief for the use of their home as a business, again via a flat rate scheme, as a replacement for more detailed expenses claims relating to gas, electricity, telephone and broadband costs. You will be able to deduct £10 a month if you spend 25 hours or more a month working at home, rising to £18 a month if you work 51 or more hours a month. Those working 101 hours or more a month, meanwhile, will be able to access a £26 monthly deduction.

There is also a flat rate scheme available to the trader using premises primarily for trade purposes, but where private use necessitates an adjustment. In this case, the allowable deduction will be calculated by the deduction of the authorised amount from the actual expenses incurred. Only such expenses as household goods or services, food, non-alcoholic drinks and utilities are designed to be covered by the scheme, with others – such as mortgage interest and council tax – still needing to be apportioned. The number of people in occupation will determine the exact rate, which could be £350 per month for one person or as much as £650 per month for three people or more.

Are you identifying every possible opportunity to legally and efficiently minimise your tax liabilities? Get in touch with Freelancer Accounting (http://www.freelanceraccounting.com) for more information on the latest legislation surrounding expenses, as well as for informed assistance with the rest of your taxation and accounting affairs from one of our seasoned accountants in Guildford.

Editor’s Note: Freelancer Accounting (http://www.freelanceraccounting.com) are represented by the search engine advertising and digital marketing specialists Jumping Spider Media. Email: info@jumpingspidermedia.co.uk or call: +44 (0)20 3070 1959 / +34 952 783 637.