Most Common Expenses Contractors Forget to Claim

Posted on in Umbrella Company.

When the discussion of paying taxes to HMRC arises, the conversation often revolves around contractors taking illegal and excessive tax deductions.

But, research by umbrella companies shows contractors often forget to take many expenses. 

Contractors have to take on many different tasks outside of what would be their normal professional duties if they were only employees, so it’s reasonable that sometimes they make mistakes.  HMRC’s tax legislation is also complex and requires time to research, making it doubly difficult for those unfamiliar with it to understand how it works. 

Why should contractors be concerned with little expenses not deducted throughout the year?

By the end of the work year, these “little expenses” can add up quite significantly.  Contractors may end up paying a couple thousand pounds or more unnecessarily in taxes. 

Some of the following expenses are common ones contractors, and umbrella companies, forget to claim:

  • Technological upgrades, such as new or upgraded software required to perform a service for a client
  • Tablet PCs which are used for performing work for clients whilst the contractor travels
  • Stationery, postage, business cards, and other minor purchases required for contractors to conduct their profession
  • Landline and mobile business telephone calls
  • Subscriptions to professional journals and publications
  • Bank charges and interest related to the contractor’s business checking account
  • Some relocation costs, if the contract requires the contractor to do so
  • A rented home or apartment near the client, as long as it is not the primary residence of the contractor
  • Overnight business stays with friends and family

Umbrella Companies Track and Manage Expenses so Contractors Don’t Have To

If all of this sounds too complicated or difficult for contractors, they can always hire an umbrella company to manage their payroll and all financial logistics.  However, contractors do need to be careful when selecting an umbrella company, as some do fraudulently claim expenses.  If HMRC discovers fraudulently taken expenses, the contractor is held responsible.  

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