What is Tax Relief?

Tax relief reduces the amount of tax payable by a person, business or company to HMRC. Claiming all applicable tax reliefs can enable a sole trader to maximise their income and pension contributions. There are more than 1,000 tax reliefs in the UK tax system and they reduce tax bills and government revenues significantly. Tax relief can be claimed on a wide variety of taxable income sources.

Sole traders, landlords and others who pay tax via Self Assessment can claim tax relief when they complete their Self Assessment tax return. Some tax relief is automatic, while you’ll need to apply for others.

Allowable expenses are a form of tax relief. For sole traders these can include the cost of buying goods or raw materials, agency fees, wages, salaries and other staff costs. Allowable expenses can also include property rent, mortgage interest, council tax, business rates, utilities, insurance and security costs. Sole trader business owners who work from home can also claim a proportion of some of their domestic costs. Business premises and equipment repairs and maintenance can also be allowable expenses, as can phone, broadband, stationery and other office costs. In some cases, the cost of equipment and tools can also be claimed as an allowable expense.

Interest on bank and other business loans can also be claimed as allowable expenses, as can bank, overdraft and credit card charges, hire purchase interest and leasing payments. Marketing costs, software, subscriptions, insurance and professional fees (eg accountancy costs) can also be claimed, as well as allowable vehicle, travel, accommodation and clothing costs.

>> Read 45 allowable expenses you can claim when you’re a sole trader.