With different rules for contractors that are self-employed and those that work through an umbrella provider, it can be a tricky task to get your head around expenses for umbrella company contractors.
But, understanding what expenses you are entitled to as an umbrella company contractor will pay off. After all, expenses are tax-deductible work-related expenses that will help you save more of your hard earned cash.
To help contractors navigate the world of umbrella company expenses, Umbrella Search has put together this handy guide outlining everything you need to know to take advantage of expenses.
What are umbrella company expenses?
Let’s start with the basics – what are umbrella company expenses?
When a contractor engages in contract work through their chosen umbrella company, they are able to claim back certain expenses for costs that have been incurred due to carrying out the contract at hand.
There is a common misconception that due to the fact that umbrella company contractors are employees of their chosen provider that they are unable to claim back expenses, however this is not the case.
In fact, many believe that it is just self employed or limited company contractors that benefit from being able to claim expenses, but you will be happy to hear that this is just a myth. You can read about more myths about umbrella companies in our handy guide.
Every umbrella company contractor also benefits from the ability to claim back certain expenses and in turn reduce how much tax they owe.
What expenses can umbrella contractors claim back?
There are certain expenses that are considered as legitimate expenses for contractors to claim back by HMRC.
The first is travel. Although contractors cannot claim back travel costs incurred on their daily commute to their home office, if you have to travel to a different office or location for any work related reason then you are able to claim back the expense of this.
Say you travel by train, bus, plane or taxi, you are able to claim back the cost of your ticket or fare. Or, if you decide to use your own car then you are entitled to claim back 45p per mile, 24p per mile if you travel by motorbike or 20p per mile if you cycle.
The next expense contractors can claim back is accommodation.
That means, should you have to stay away from home due to work, you are able to claim back the cost associated with this. This includes the cost of a hotel or accommodation, as well as the cost of meals purchased whilst you are away.
As well as travel and accommodation, contractors are also able to claim back training costs. This relates to any training courses you participate in that are related to the job.
The final expense contractors can claim back is for equipment. Any tools or equipment that the contractors has to purchase in order to carry out their work is a legitimate expense which they can claim back.
How does this impact your take home pay?
Expenses are considered tax-deductible by HMRC. This means that if you claim back £100 in expenses one month, the £100 will be deducted from your pay before it is processed for tax, lessening your tax burden.
For this reason, being able to claim back expenses is widely considered as a great benefit to contracting through an umbrella company. What’s more, the umbrella company will help you every step of the way with your expenses, so you don’t need to worry whether you’re getting it right.
How can I claim back my expenses?
As we’ve mentioned, one of the many benefits to working through an umbrella company is that they will be there to help you claim back your expenses and ensure that everything is put through correctly. In fact, they will take on the hard work for you.
However, there are certain things the contractor will also need to in order to assist the process.
Firstly, contractors must ensure that they practice good record keeping. This means keeping a record of all your expenses, including receipts and invoices. You must keep these for at least 6 years, due to the fact that if you were ever investigated, HMRC can look back as far as 6 years and will expect you to have your records in tact.
You will then need to pass on the relevant information to the umbrella company of what expenses you have incurred within a certain timeframe. Usually, when the contractor submits their timesheet outlining hours worked, they will inform the provider of any expenses incurred too.
The umbrella company will then take care of ensuring that the expenses are correctly offset against your tax bill, before paying you your salary.
Considering an umbrella company?
Now you know the rules when it comes to umbrella company expenses and what you can claim back, you may be considering making the move to an umbrella company. After all, the ability to claim back expenses, alongside the plethora of other benefits that an umbrella company offers, makes working through an umbrella provider an attractive proposition.
What’s more, you can rest assured that your chosen umbrella provider will always be at hand to offer guidance and advice, so you can make sure you always get it right when it comes to things like claiming expenses.
To see how Umbrella Search can help you find the perfect umbrella company for your contracting needs, why not get in touch with the team today? Our team of experts work hard to understand your requirements in order to match you up with an umbrella company that will be the perfect fit.
After all, with lots of umbrella companies out there all lobbying for your attention, it can be difficult to know which one to pick. That’s where we’ll give you a helping hand, so you can make sure you’re making a well-informed decision.
To see how we can help you, just get in touch with the team today.
Explore the essentials of managing contractor expenses with our in-depth guide. Learn how to track, claim, and maximise deductions for your contractor expenses effectively, ensuring compliance and optimising your financial strategy. Ideal for freelancers and contractors looking to enhance their financial management skills.
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