Simplified expenses now in place for freelancers

The simplified expenses regime for small businesses has now started, writes Jane Hamilton of accountancy firm Davies Mayers Barnett.

The new regime replaces the previous non-statutory deductions that could be claimed for business mileage, use of home or board and lodgings. The scheme isn’t available to limited companies or limited liability partnerships.

Mileage as a freelancer

Under the new arrangements, sole traders and business partnerships can calculate allowable expenditure on vehicles using a flat rate based on mileage (45p per mile for cars and goods vehicles for the first 10,000 miles and 25p per mile thereafter. For motorbikes the rate is currently 24p per mile).Once a business has chosen to use the scheme for a vehicle they must continue to do so for as long as the vehicle remains with the business. The scheme cannot be used if capital allowances have already been claimed in respect of that vehicle.

Use of home as a freelancer

There will also be an optional flat rate scheme available for claiming relief for using a home for business.This is intended to replace detailed claims for expenses such as gas, electricity, broadband and telephone costs.Where 25 hours or more a month are worked the available deduction will be £10 a month.For 51 or more hours this increases to £18 per month. Once 101 or more hours are worked, the deduction is £26 per month.

Use of home, including lodgings

Where premises are used mainly for trade purposes but an adjustment is required for private use the trader can also choose to use a flat rate scheme. In this case, the authorised amount will be deducted from the actual expenses incurred to calculate the allowable deduction. The scheme is only designed to cover expenses such as household goods or services, utilities, food and non-alcoholic drinks.Other expenses (such as mortgage interest and council tax) will still need to be apportioned. The rate will be determined based on the number of people in occupation and varies from £350 per month for 1 person up to £650 per month for 3 or more.

Editor’s Note: Further ReadingFreelancer’s guide to expenses – part 2


18th July 2013

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