About the Author

We know what it’s like to be a freelancer, so here at Freelancer News we love keeping you up to date with all the latest news, tips and advice for freelancers. We cover tips on how to get work as a freelancer, economic news which may affect the way you work and the best way to handle your accounts and finance.

To make sure you’re always getting the latest news, we’ve gathered a team of writers with specific expertise and industry knowledge. That way you know that our writers can handle any aspect of freelancer life that you might need help with. Below are the latest articles from Stephanie.

Is My Labour an Allowable Expense?

Whether or not you can classify your labour as an allowable expense comes down to how you pay yourself from the business, and that depends on what type of business structure you have in place.

As a sole trader, any profits that the business makes are yours to keep after paying tax. That means you aren’t able to reclaim the cost of paying yourself as an expense.

If you run a limited company, you are considered separate from your business, meaning you are able to pay yourself a salary as a company director.

Salaries are eligible as an allowable expense, so you can claim this back on the company tax return and lower your corporation tax bill.

You can also take dividend payments, but these are taken from the company profits, after tax, so the company cannot claim these as an expense.

Paying yourself a dividend through a limited company is one of the most tax-savvy ways to take money out of the business thanks to the lower personal tax that is paid on dividends.

So now, to put allowable expenses into a whole lot more context for you, let’s take it back to the very basics:
 

What are allowable expenses?

An allowable expense is something that comes at a cost to your business but is not taxable (exempt from being taxed). Allowable expenses are normally things that are essential to the running of the business, i.e., unavoidable costs, hence why they are eligible for tax relief. If you like things in visual form, this video explains allowable expenses for businesses in more detail!
Anything that applies as an allowable expense reduces the business’s taxable profits, and therefore brings your tax bill down.

So, for example, if your business has an annual turnover of £50,000 but you spend £5,000 on allowable expenses each year, you’ll only pay tax on the £45,000.

Common allowable expenses according to official HMRC guidelines include things like:

  • Cost of travel – tickets, mileage, fuel, and parking (excluding standard travel to and from work).
  • Costs associated to employees – salaries, bonuses, and pension contributions.
  • Uniforms and safety clothing (not your everyday work wardrobe).
  • Bills including phone bills, utility bills and rent payments.
  • Items you buy to resell (e.g., stock and raw materials).
  • Advertising and marketing, such as website running costs and business cards.
  • Business-related training courses.

It’s worth noting here that if you use the £1,000 tax-free trading allowance, you will not be eligible to claim expenses.

The trading allowance enables a sole trader to earn up to £1,000 in self-employment income tax-free, without needing to submit a Self Assessment return. However, if you use your trading allowance on your tax return, you can’t then claim allowable expenses. It means it’s important to work out all your expenses in advance, so that you can use the one which gives you most tax relief!
 

What allowable expenses can a freelancer claim for?

There are a number of allowable expenses that freelancers can claim tax relief on, particularly if you spend a great deal of time working from home (which might be now more than ever, post-pandemic).

Allowable expenses when working from home for freelancers include:

  • Council tax payments
  • Rent or mortgage interest
  • Phone/mobile usage (including data)
  • Internet connection
  • Utilities (heat, electricity, water)
  • Property insurance
  • Repairs and maintenance of business-related areas of the premises

For things like utility bills, internet, and phone costs, you can only claim for the portion of the expenses that are directly incurred through business use (not personal use).

HMRC leave it down to you to calculate these portions of usage but falsely swaying it in your favour is a risky move as it will spell serious trouble if you were to be investigated at any point.

As a freelancer, you can also claim for things like:

  • Stationery (including paper, printer inks, etc)
  • Computer software
  • Warranties
  • Accountant and bookkeeping fees
  • Postage costs
  • Business travel costs (e.g., vehicle insurance, fuel, parking, tickets, hire charges, hotel rooms, repairs)
  • Subcontractors
  • Some training courses
  • Agency fees
  • Insurance premiums
  • Some legal and/or financial expenses
  • Lease payments
  • Bank and credit card charges
  • Professional subscriptions

That list is by no means exhaustive either so it’s certainly of great benefit to look into the costs you could be getting relief on.

Hopefully, you’ve found this article useful but when it comes to staying on top of your tax efficiency, you might find it worth speaking to a qualified accountant. They’ll be best placed to point you in the right direction of what you can and can’t claim as an allowable expense when freelancing.

Do I Need a Business Mentor?

Answering this question is tricky because realistically, you don’t need a business mentor. You’re probably perfectly capable of surviving – and thriving! – without one.

That said, the rewards you can reap through working with a business mentor make it an extremely worthy investment – and with many services offering free business mentoring, all it might require is a simple investment of your time and brainpower.

Friends, family, and colleagues are all great sources of encouragement, support and inspiration, but expert guidance is what will really take you to the next level.

The benefits of working with a business mentor include:

  • Broadening your knowledge and skillset
  • Supporting the next generation of talent
  • A chance to learn from the experiences (and mistakes) of others
  • A neutral, non-biased perspective
  • Boosting your confidence as a business owner

All the above come together to foster a much more well-rounded entrepreneur, with the ability to make better decisions when it comes to developing an offering or service. It will do wonders for your self-confidence, which will have a knock-on impact on your performance.

So, to help answer the question about whether you should enlist the expertise of a business mentor or not, let’s look at each of the benefits in a little more detail.
Read More

Freelance Startup Support with the New Enterprise Allowance

Recent times have been tough to say the least. For freelancers and the self-employed it’s been a time of struggle, looking for support amidst the global health and economic crisis of COVID-19.

That’s why we make it our mission to guide aspiring freelancers and budding business owners towards the grants, policies and support avenues that are out there to help them.

Today, we turn the spotlight on the New Enterprise Allowance (NEA), which has been in force since 2011 but is perhaps now more valuable than ever. Read More

Can I Freelance Whilst Working for an Employer?

The very short answer to this question is that yes, in most cases you are allowed to carry out freelance work whilst in employment.

That said, there are a number of circumstances that might mean this isn’t the case, or that there are conditions your employer expects you to adhere to.

 

Why decide to freelance if you’re already working?

Common reasons why some people choose to freelance alongside full-time or part-time employment include:

  • Earning extra money to supplement their salary.
  • Fulfilling a skill or passion that’s a diversion from their regular day job.
  • Using it as an opportunity to learn and practice new skills.
  • Having more creative control or professional autonomy over projects they’re working on.

 

Are you ready to jump straight in?

But why not just take the plunge, and become a full-time freelancer? Well, it’s not for everyone. The decision to freelance alongside employment, rather than instead of it, is often down to factors like:

  • Not yet earning enough through freelance income alone.
  • Not wanting the pressure of drumming up business or relying on clients to pay on-time, as opposed to a regular monthly PAYE salary you don’t have to chase or worry about.
  • Concerns that securing a mortgage or other finance will be made more difficult if freelancing is the sole source of income.
  • Preferring the culture of a shared working environment and ‘office life’ (freelancing can sometimes get a bit lonely).

 
So, for some people, choosing to freelance as a side hustle is the most desirable option. Just as long as it’s manageable, and your employer permits it.

To make things as stress-free as possible, and to keep you out of unnecessary trouble, here are some tips on balancing freelance work and employment.

 

Start by checking your employment contract

Some employers ban their workers from undertaking freelance work entirely. If this is indeed the case, it should be made clear in your employment contract.

So, before you get stuck into any gig work or side projects, make sure you check! You don’t want to breach any rules that might affect your employment status if your boss gets wind of it.

 

Why won’t my employer let me freelance?

An employer might refuse permission to carry out any freelance work for a number of reasons. For instance, if your potential clients would mean you’re going after the same audience.

For you, as a freelancer, it makes perfect sense to seek out additional work in the same industry or marketplace. After all, that’s where your skillset and experience lies. Understandably your employer might be less keen to have another competitor in the arena!

 

Be transparent with your employer by putting them in the picture

If your contract doesn’t contest freelancing then by all means, get stuck in but first, have a conversation with your employer. Not because you’re obliged to, but just because it’s the considerate thing to do.

You never know, your employer might even support your side hustle and be willing to discuss things like flexible working hours to accommodate it.

The best working relationships begin and end with open, honest lines of communication so we always recommend keeping your employer informed.

 

Make your freelance clients aware of your other commitments

On the flip side, as well as keeping your employer in the picture, it’s also a good idea to be honest and transparent with your freelance clients too.

Although it can be tempting to conceal your employment commitments, making your freelance clients aware of your working hours and realistic availability will help manage expectations on both ends. It will also help make sure they’re setting you attainable deadlines and ensure that you don’t end up spread too thinly or completely burnt out.

 

Acknowledge when the balance becomes too biased

One final word of advice before we depart is to stay abreast of how the balance is tipping. You don’t want your work in one area causing you to underperform in another.

You can’t let your freelance work detract from your day job (in time or energy) but if you’re passionate about, and inspired by, your extracurricular projects? Then you shouldn’t let employment completely bulldoze that either.

If you notice a bias starting to develop, it might be decision time. Perhaps you’re ready to take the risk and go full-time freelance. Or alternatively, you might need to scale back your side hustle to improve your wellbeing and health.

If you’re considering freelancing, check out our article for things to consider before you get started, or check out our support hub for becoming self-employed..

What a Freelancer Should and Shouldn’t Do for Free
Simple Ways to Go About Fighting Freelancer Loneliness
Why freelancers should be using accounting software

There are the enjoyable parts of going freelance and being your own boss. There are also the boring bits which you’d rather avoid, but are important nonetheless. 

Don’t worry, we understand that your business accounting most likely falls into the second category. If numbers and paperwork aren’t really your bag, then we highly recommend getting acquainted with accounting software such as Pandle. Read More

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Freelancing & Full Time Employment: Can the Two Co-Exist?