The last three years haven’t been easy for those in self-employment. First the pandemic threw everything into disarray, and now the cost of living crisis is causing profits and revenues to drop while business (and personal) expenses increase. Not to mention tax rises, which will no doubt eat into the earnings of sole traders and freelancers who don’t have a big corporation to fall back on in times of financial uncertainty.
Tax can be a huge expense for the self-employed, and there’s nothing worse than realising you owe more than you thought when the deadline to file your tax return comes around. You can find out how much tax you’ll pay using our self-employed tax calculator.
Some of this can be negated via allowable expenses. An allowable expense is an essential cost that helps keep a business running, that businesses don’t have to pay tax on. The cost of these expenses (think buying petrol for your work van) are deducted from a businesses profits before you pay tax.
By not claiming all of their allowable expenses, small business owners could be losing out on the equivalent of hundreds of pounds per year. We’ve taken a look at common self employed roles, to see how much they could be missing out on each year by not claiming.
Highest Potential Expenses by Profession
|
Profession |
Expenses Per Year |
20% Saving |
|
Beauty Therapists |
£5,562 |
£1,112 |
|
Labourers |
£3,812 |
£762 |
|
Painters & Decorators |
£3,770 |
£754 |
|
Cleaners |
£3,690 |
£738 |
|
Dog Walkers |
£2,968 |
£593 |
Beauty therapists could lose £1,112 by not claiming on allowable expenses
Beauty therapists take home an average of £8.25 an hour, or £14,543.36 per year after tax and before allowable expenses. Arguably with the highest value of expenses, renting a space in a salon could put beauty therapists on the back foot, especially if they don’t claim their allowance.
- Home office costs – £312
- Salon rent – £4,800
- Equipment and supplies, including makeup, nail varnish, tweezers – £360
- Uniform – £90
Total allowable expenses: £5562
Beauty therapists could save £1,112 if you claimed on allowable expenses.
Labourers could be losing £762 a year by not claiming allowable expenses
Labourers can make an average of £10 an hour or £16,340.42 a year in revenue after tax if they don’t account for allowable expenses.
- Tools – £120 per year
- Mileage costs (based on 6,000 miles per year) – £2700
- Insurance, including tool cover and personal injury insurance – £600
- Uniform – £200
- Trade union membership – £192
Total allowable expenses: £3812
Labourers could save £762 per year on allowable expenses.
Painters and Decorators could lose £754 per year from these allowable expenses
Painters and decorators make, on average, £14 an hour. This is £22,503.88 per year after tax if they don’t account for their allowed expenses.
This profession is able to claim up to £120 on tools without showing receipts (this is known as the tool tax allowance). However, if they have spent more than the allowance and have the receipts to prove it, they can make a capital allowances claim, which usually amounts to 18 percent of the total costs of the tools.
- Tools – £120 per year
- Mileage costs (based on 6,000 miles per year) – £2700
- Insurance, including portable tools and personal accident insurance – £400
- Uniform – £150
Total allowable expenses: £3770 per year
Painters and decorators could save up to £754 from allowable expenses per year.
Cleaners are potentially losing £738 a year by not claiming expenses
Self-employed cleaners make an average of £10 an hour, or £19,500 per year. Without accounting for allowable expenses they’ll be left with around £16,340.42 total revenue after tax. Common expenses for the cleaning profession include:
- Equipment and supplies, including a vacuum cleaner, mop and bucket, cleaning chemicals, cleaning costs – approximately £500 for your initial outlay
- Work uniform, including shoes, trousers and t-shirt – £100
- Personal Protective Equipment, including masks, aprons and gloves – £30
- Mileage costs (based on 6,000 miles per year) – £2700
- Cleaners insurance – £360
Total allowable expenses: £3690
Cleaners could save up to £738 per year on allowable expenses.
Dog walkers could be losing £593 per year by not claiming allowable expenses
On average, dog walkers make £10 pound an hour, which means they make £16,340.42 in revenue after tax, and before allowable expenses. There are various expenses faced by self employed dog walkers, including the below:
- Equipment, including dog bows, leads, treats and food – £500
- Website upkeep – £40
- Home office costs – £312
- Dog cages – £450 initial cost
- Uniform – £160
- Mileage costs – £1350, based on 3,000 miles per year
- Insurance – £60
- National Association of Pet Sitters and Dog Walkers membership – £96
Total allowable expenses: £2968
Dog walkers could save £593 on allowable expenses per year.
Commonly missed allowable expenses
Some allowable expenses, like the cost of materials, tools and rent, can seem self-explanatory; but there are a number of things you can claim on that aren’t just physical purchases. Commonly missed allowable expenses include the use of a home office, mileage on your vehicle (if you travel for work), training and professional subscriptions and memberships. It’s also important to remember that you can claim tax relief on uniform costs, as long as you use the clothes for business purposes only.
- Home office expenses
- Mileage on your vehicle
- Training costs
- Professional subscriptions and memberships
- Uniform costs
Summary
Beauty therapists are likely to incur the biggest losses by not claiming their allowable expenses, especially if this includes rent for a space in a salon, which can cost thousands of pounds.
Vehicle costs are also a huge overhead to remember to claim on as a self-employed person, especially if you’re a cleaner, labourer or painter and decorator who regularly travels for work and requires a van to keep tools and equipment safe overnight.
Methodology
We worked out the average post-tax revenue of each self-employed role by inputting the total full-time (37.5 hours/week) salary into our self-employed tax calculator. We then found the total cost of the average expenses for each profession, before working out the savings based on 20 percent of this figure.
