Would you rather someone else handled this? Our Self Assessment service means we prepare, check and file your tax return with HMRC on a fixed fee.
This case study is based on genuine client work carried out by our practice. Names, figures and identifying details have been changed to protect confidentiality, and the numbers shown are representative of the situation rather than the exact amounts. Your own position will differ.
The scenario
A freelancer turning over £45,000 files their own return each year. They claim their laptop, their software subscriptions and their accountancy fee, and that is about it. It takes an evening and they are quietly proud of handling it themselves.
They are almost certainly paying more tax than they need to, and not because they are doing anything wrong. They are claiming what they remember.
What tends to go unclaimed
Working from home. There is a flat rate by hours worked, which is simple but usually modest. Or you can apportion actual costs, rent or mortgage interest, council tax, heat, light, broadband, by rooms and time used. For someone genuinely working from home full time, the apportioned method is often worth several times the flat rate. Be aware apportioning has capital gains implications if a room is used exclusively for business, which is why the advice is usually not to make any room exclusively business.
Mileage. 55p a mile for the first 10,000 business miles, 25p after. Client visits, trips to suppliers, the bank. A freelancer doing 4,000 business miles has a £2,200 deduction sitting unclaimed because nobody kept a note.
Phone. The business proportion of a personal contract is allowable. Most people claim nothing because it is not a separate bill.
Pre trading expenses. Costs in the seven years before you started trading can be claimed as if incurred on day one. The laptop bought two months before the first invoice counts. Almost nobody claims these.
Training that maintains or updates existing skills. The line between updating a skill and acquiring a new one matters here and it is worth getting right.
Bank charges, professional subscriptions, insurance, the small stuff. Individually trivial, collectively often four figures.
What the difference is worth
Suppose £4,000 of genuine costs were going unclaimed. At the basic rate that is 20% income tax plus 6% Class 4 National Insurance, so about £1,040 of tax on money already spent. For a higher rate taxpayer it is 42%, so £1,680.
Every year. And you can generally amend back four years, so a freelancer who has been under claiming for a while may be owed a meaningful sum.
The line to stay on
Expenses must be wholly and exclusively for the business. That is the test and it is stricter than people assume. A suit you could wear anywhere is not allowable, however smart you need to look. Lunch while working is generally not allowable, because you would have eaten anyway.
Claim what is genuinely yours. Do not invent. The goal is to stop leaving real money behind, not to get creative, and an accountant worth having will tell you when a claim is not going to hold.
The point of this example
Doing your own return is not the mistake. Claiming from memory is. The costs that get missed are the ones that never generated an invoice you filed somewhere: the mileage, the home office, the phone.
If you have been filing your own and want a second look at the last few years, get in touch.
Sure you are not overpaying?
We review your costs and reliefs, claim everything you are entitled to, and often reclaim relief missed in earlier years. The saving frequently beats the fee.