UK Tax Allowances: What Freelancers Can Claim

As a freelancer in the UK, you’re taxed just like any other self-employed business. That means you can claim a range of allowances that reduce the amount of income subject to tax. Understanding them — and keeping the right records — can make the difference between an unnecessary tax bill and money in your pocket.

The Big Three

1. Personal Allowance
Everyone gets a tax-free allowance each year before paying Income Tax (currently £12,570 for most people). If your total income is below this, you won’t pay tax at all.

2. Trading Allowance
If your freelance income is £1,000 or less, you don’t even need to register. For larger incomes, you can deduct either £1,000 automatically or your actual expenses (but not both).

3. Capital Allowances
Instead of “depreciating” assets, the UK system lets you deduct some or all of the cost up front. The Annual Investment Allowance usually covers laptops, desks, and other equipment.

Home and Travel

• Home Office: Either claim a flat rate based on hours worked at home or apportion actual bills (utilities, broadband, rent).
• Mileage: Use HMRC’s approved mileage rates (45p per mile for the first 10,000 miles, 25p thereafter) or claim actual vehicle costs.

Example Walkthrough

Anna, a freelance designer, earns £40,000:

• Personal Allowance: £12,570 tax-free.
• Expenses: £6,000 actual costs.
• Taxable income: £21,430.
  She saves over £1,200 in tax compared to not claiming allowances.

Common Pitfalls

• Forgetting to log mileage or apportion bills.
• Mixing personal and business accounts, making it hard to separate costs.
• Double-claiming: you must pick either the trading allowance or actual expenses.

Checklist

• Keep a digital folder for receipts each month.
• Record mileage with date, purpose, and distance.
• Review whether simplified or actual costs save more.
• Reconcile income and expenses quarterly.

Useful Links

• https://www.gov.uk/self-assessment-tax-returns
• https://www.gov.uk/expenses-if-youre-self-employed
• https://www.gov.uk/capital-allowances

Bottom line: UK tax allowances are there to make sure freelancers only pay tax on true profit. Claim them consistently and you’ll avoid overpaying HMRC.