Freelance Designers – what expenses can I claim?
About the industry
There are over 65,000 freelance Designers in the UK.
The average Freelance Designer makes between £200 to £400 per day. Senior graphic designers or creative lead salaries range from £35,000 to £55,000. A creative director can make £60,000+.
What income should I track?
Many Freelance Designers have multiple sources of income. They may work for multiple companies. They may have their own clients and they may help other Designers with bigger jobs. Typically, Designers are paid either as an employee (via a payslip with taxes taken out) or as a sole-trader (without taxes taken out).
I get paid via a payslip (PAYE)
When you are paid only through PAYE and make no extra money via self-employment, you (probably) don’t have to file a self-assessment. Check out more rules here.
I get paid as a sole-trader and my employer or clients don’t take out taxes
Many Designers are paid by their clients directly without taxes taken out. This is typically made out to you personally. You must report to HMRC all income received through self-employment.
I have both!
If you have both PAYE income as well as self-employed income, you must tell HMRC about both types of income. Your tax rate is determined by your total income during the tax year.
What expenses are business expenses?
As a Freelance Designer, you have expenses. Your expenses range from software to website costs and insurance. It is important to keep records of these transactions throughout the tax year.
Finmo has compiled a list of common and eligible expenses for designers to claim when completing their self-assessment.
Freelance Designer Equipment & Software
Designers have a range of equipment and software needs for their job. The following is not an exhaustive list but when buying this equipment wholly and exclusively for work, these are all business expenses.
Equipment – Laptop, mouse, etc.
Software – e.g. Photoshop licence
Film & Processing
Books, magazines, reference materials
Office, Property & Equipment
Almost all sole-traders and self-employed people work from home in some capacity. Whether your office is your home and clients come to you or you compile your books and file your self-assessment from home, some of your home can be written off for business purposes.
We have written about the five most confusing business expenses, including home offices, and equipment that should answer all your questions.
Travel, Subsistence & Entertaining
Travelling for work is often a necessary evil. When it comes to travel and taxes, the question of ‘what is travel and what is not travel’ is determined by your place of work.
While traveling, anything you spend money on that you wouldn’t have otherwise is a business expense. Food, travel costs (trains / planes / automobiles, etc.), hotels, and other ad hoc expenditures are considered subsistence. These are all business expenses.
When it comes to entertaining, the news is not so great. HMRC cut down significantly on entertainment expenses. They put almost a complete stop to expensing entertainment. When you take clients out to lunch and pay, the portion of the lunch attributed to you is considered subsistence, but the portion for them is entertainment and not a valid business expense for tax purposes.
Marketing, Subscriptions & Training
Facebook and Google count themselves among the most valuable companies in the world because they allow businesses to find customers (although there is still a debate on how important social media is to a creative freelancer’s career). Finding customers is one of the hardest and most expensive business activities in today’s environment. Marketing your business to acquire customers is a business expense.
Marketing is made easier when you have a great product. In the creative industry, your clients are your product. You know staying on top of industry changes and your craft is important. Subscriptions and memberships to industry specific groups are business expenses.
As with subscriptions, training and educational programs ensure you know the trends and have the skills to say yes when your clients ask.
Legal & Financial
Have you ever had to hire a lawyer for your business? What about an accountant and business software to help you sort your income and expenses and handle your taxes? (we can help with that)
In the creative industry, insurance is a necessary evil. If you don’t have insurance for your craft, we suggest you talk to our friends at Superscript.
Any financial costs associated with your business are considered a business expense. Interest paid on a loan taken out solely for the purpose of your business or bank charges specifically for your business are considered expenses.
For more info on what expenses you can claim as self employed within other industries check out our article here.
How Finmo helps
Finmo helps keep track of your income and expenses and at the end of the year, connects you with an accountant who helps you fill in and submit your self-assessment.
Sign up here.