Claiming expenses as a Consultant
Reducing you tax liability
Consultants with private income can claim business expenses which will materially reduce their tax bills.
Properly advised, a business expense of £1,000 could reduce your year-end tax payments by up to £630.
Of course because of this, HMRC scrutinise claims for business expenses in detail and consultants are regularly the subject of HMRC tax investigations, this is why you should have specialist accountancy and tax advice to make sure you are following the rules correctly.
Consultants with private practice income
Being self employed, you are able to claim business expenses against your profits. This will reduce your tax bill.
Tax deductible expenses
We have set out some of the types of expenditure that may be allowable. It should not be seen as an exhaustive list. What is allowable depends on the facts in each case.
Can I pay my spouse a salary or a pension contribution out of my private income?
This is the most popular question we are asked by our consultant clients! And the short answer Is YES. If you pay your spouse a salary or a pension contribution at a commercial rate for the work they do for your private practice, HMRC will not object.
Depending upon your individual circumstances this could save a significant amount of tax see more about this here.
Claiming for Professional subscriptions
The subscription costs we help our clients claim a deduction for on a regular basis are:
MDU, MPS, BMA, GMC.
An annual subscription to a body shown in the list approved by HMRC is allowable where either the subscription is paid by a self-employed individual or by an employee, and the activities of the body are directly relevant to the self-employment or employment.
Use this link to access the full list http://www.hmrc.gov.uk/list3/
Motor expenses can be claimed on a car assuming it is used for business purposes. The expenses have to be apportioned so that only the percentage incurred ‘wholly and exclusively for the purposes of the trade are allowed. Fuel efficient cars now attract tax allowances of 100%.
Use of your home as your office
If you carry out work related to your private income from your home, you will be able to claim a tax deduction to cover the additional costs of working from home. There are several ways to claim. Some accountants use a fixed amount per week, while others calculate a claim using a percentage of the actual running costs of the home.
Many consultants think that if they make this claim there will be a capital gains tax implication when they sell their home. This will not be the case as long as no part of the house is used exclusively for business purposes.
Many other types of expenses can be claimed by consultants with private income. We provide our consultant clients with detailed checklists and advice to ensure that all allowable expenses are claimed.
If you are trading through your own Limited Company
Assuming IR35 does not apply to your limited company, the tax deductible expenses which can be claimed are similar to those listed above for self employed consultants.
If IR35 applies to your limited company, the tax deductible expenses are very limited. If the ‘off payroll’ working rules are applied to your limited company no expenses can be claimed as a tax deduction.
How we can help
We can advise clients on:
- Which expenses are deductible for tax whatever your business structure?
- How to make the relevant claims.
- What percentage of a cost can be claimed as a business expense?
We are chartered tax advisors, expert in ensuring our consultant clients claim the maximum business expenses and pay the minimum tax.
We always act within the guidelines and the spirit of the guidelines laid down by HMRC.