When you claim your travel expenses as a self-employed individual, the first important thing you need to do is identify which travel comes under a specific category. Whether you are self-employed or working with an organisation, the travel that you are covering daily as a commute to your permanent workplace will not be considered an expense that is deductible. It becomes an allowable expense when you are travelling to a workplace that is temporary. The cost and amount of money that you spend on ordinary commuting can not come under the allowable expenses. Many of you must be wondering by now what are self-employed tax-deductible expenses then.
Further, this guide will help you to gather information about what are permanent and temporary workplaces, how are they related to travel expenses, what are allowable tax-deductible expenses for self-employed individuals, and what points you should be considering before you plan to claim the costs for tax purposes.
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What are Temporary and Permanent Workplaces?
Sometimes the regular workplaces are temporary, however, the grey area is still there and the point becomes complicated. When you are associated with a construction project and you expect to work there for a duration of two years at least, many of you might confuse it with a temporary workplace. However, the case is entirely different because of the duration. This is a permanent workplace.
How are Temporary and Permanent Workplaces Related to Travel Expenses?
If we talk about the salesperson who works in the field, this will also be considered his permanent workplace. The commute and travelling expenses from some areas will not be considered allowable expenses in this scenario. The travel that is done for the business meeting can be claimed while you’re doing your tax returns. In some cases, you might require to travel to visit a client.
If you travel from the permanent workplace, these expenses will be considered, however, if you travel from home to the client the expenses will be allowable in a few circumstances. You can seek the help of a professional to understand the rules of HMRC for your unique situation.
What are Self-Employed Tax-Deductible Expenses?
Travel for business purposes comes first on the list of tax-deductible expenses. While you are on a business journey, it is imperative to understand that you need to keep all the related receipts for any transport you have used. This includes the uses of public transport as well like buses, vans, cabs, and taxis. The journey that is purely related to the business purpose will be considered. You can even use Transport for London’s “TFL App” if you are travelling in London. You should keep the receipts intact that are related to the toll booth charges, car rental, parking costs and congestion charges. A few salient features to consider in this regard are explained below.
1- Mileage Tracking
In case you are the one who is driving, you will have to keep a track of the mileage. This should be 45p per mile for the initial 10,000 miles. This is the instruction for the cars and vans. This will help you to save a lot of money.
2- Cost of Travelling
One of the frequently asked questions that people ask is whether you have to avail of a cheap form of travel while you are on a business trip. The simple answer is no. For example, you are travelling in the UK and the tube cost you pay is £5.90, however, if you find it easy to take a cab you can have one. Even if the cab is an expensive commute, you do not need to worry about that.
What are the Things to Remember Before You Claim Expenses for Tax Purposes?
The take-home points you must remember before you plan to claim the allowable business expenses are listed below.
- You should keep the record of your business travel intact to get approval and provide any kind of evidence that is required.
- Keep a record of the purchases that you have done for your business and ensure to keep it separate from your personal expenses.
- Your mileage log should be as detailed as possible. You can better use the automatic mileage tracking app.
- The partial parts of the journey may not include in the list of allowable expenses and your claim may not be successful if you add them.
- Ensure to understand your journey details to make an accurate tax return and get the claim of the maximum that you have spent.
- It sounds like a time-consuming process but it will help you to provide pieces of evidence when required.
- You can get in touch with the professionals if you are unable to understand the details of your journey and how to record them.
The Bottom Line
Now that you have gathered a fair amount of information about self-employed tax-deductible expenses, we can bring the discussion towards wrapping up. The deductible travel expenses for a self-employed individual might sound complicated to record every detail of the journey, however, you can use the automatic apps to do the needful and save time. The more detailed your record is, the more accurate the tax return you will be able to file. You can even take the help of an advisor for a better comprehensive guide. We hope these few minutes of reading have helped to develop a better understanding of self-employed tax-deductible expenses and tax rates.
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Disclaimer: The information about the self-employed tax-deductible expenses provided in this blog includes text and graphics of general nature. It does not intend to disregard any of the professional advice.