Tax deductions for gig economy workers

What is the gig economy?

The gig economy encompasses various types of independent work, such as ride-sharing, food delivery, freelance writing, graphic design, and more. If you're earning income outside of traditional employment, you're likely part of the gig economy. While this work offers flexibility, it also requires a keen understanding of tax obligations, as you'll need to file a self assessment tax return.

Key tax deductions for gig economy workers

• Home office expenses - If you use a part of your home exclusively for work, you can claim a portion of your home expenses as a tax deduction. This includes rent, mortgage interest, utilities, and home insurance. The amount you can claim depends on the size of your workspace relative to your home.

• Vehicle expenses - If your gig involves driving, such as ride-sharing or delivery, you can deduct vehicle-related expenses. These can include fuel, maintenance, insurance, and depreciation. Alternatively, you can use the standard mileage rate provided by HMRC.

• Supplies and equipment - Any items you purchase that are essential for your work, such as a computer, software, office supplies, or tools, can be deducted as business expenses. Keep receipts and records to substantiate your claims.

• Marketing and advertising costs - Promoting your services through ads, business cards, or a website? These costs are fully deductible. Marketing is an essential expense for growing your gig, and HMRC allows you to claim these as deductions.

• Professional services - If you hire an accountant, solicitor, or any other professional to help with your business, their fees are deductible. This includes costs related to legal advice, tax preparation, and other consultancy services.

• Training and education - Investing in your skills is crucial for staying competitive in the gig economy. Expenses related to courses, certifications, or even books that directly enhance your professional skills can be claimed as deductions.

• Travel expenses - If your gig requires you to travel, you can deduct expenses for transportation, accommodation, and meals. However, it's important to note that commuting between your home and a regular workplace is not deductible.

• Internet and phone bills - Gig workers often rely heavily on their phones and the internet. You can claim a portion of your phone and internet bills that are used for business purposes. Just ensure you keep a detailed log of business vs personal use.

• Insurance premiums - Certain insurance policies, such as public liability or professional indemnity insurance, are deductible if they are directly related to your work. This does not include general health or life insurance.

• Bank fees and interest - If you have a dedicated business bank account or a business loan, the associated fees and interest payments are deductible. This also includes transaction fees from platforms like PayPal or Stripe if they are used for your business.

How to maximise your deductions

• Keep detailed records - Accurate and up-to-date records of your expenses are essential. Use apps or software to track receipts, invoices, and payments throughout the year.

• Separate business and personal expenses - It’s best to have a separate bank account for your business transactions to avoid confusion and ensure all deductible expenses are easily identifiable.

• Claim allowable expenses only - HMRC has strict rules about what can and cannot be claimed. Ensure you're only claiming expenses that are wholly and exclusively for business use.

Simplify your self assessment with our service

Filing your self assessment tax return can be daunting, but it doesn't have to be. We make filing your self assessment easy and straightforward. Just fill out our simple questionnaire, and you'll receive a personalised, step-by-step guide on how to fill out your self assessment, tailored to your unique tax situation, for just £9.99.

Navigating taxes as a gig economy worker may seem overwhelming, but by understanding and utilising available deductions, you can significantly reduce your tax liability. Stay organised, keep meticulous records, and consider seeking professional advice to ensure you're not leaving money on the table. Remember, the more informed you are, the more you can save!