For contractors or freelancers claiming tax back for expenses is one way you can maximise your 'take home pay' and minimise your tax bill. Done correctly, it's perfectly legal and is not 'tax avoidance'. Naturally, HMRC has strict regulations and controls on claiming expenses and any costs incurred need to be "wholly, exclusively and necessarily" through your work. Tax officials can at any time make a detailed investigation into your accounts and will be particularly interested in your expenses claims.

You can claim expenses when working through an Umbrella company and you will need to provide detailed documentation to the company to be able to do so. You should always keep receipts and records of any expenses incurred and you will need to keep these for at least five years. Below are brief details of some of items you can claim expenses from an umbrella company.

Expenses you can claim

- Mileage & Travel: You can claim for mileage to and from work using your own vehicle, travelling as a passenger in a car and for other travel costs associated with your work. Rates vary if you are travelling in your own or somebody else's car and also are paid at a lower rate after the first 10, 000 miles in a year. You will need VAT receipts for fuel to claim for travel.

- Meals and accommodation: Some umbrella companies have what's called a 'Dispensation'. This may allow you claim for meals if you have incurred a cost and have a receipt, but you may not need to send the receipt to your umbrella company. If you are staying away from home, you can claim accommodation expenses and for an evening meal.

- Equipment & Clothing: Expenses are allowable for 'tools' and for protective clothing - not normal day to day attire. Tools must be exclusively for work use as must any expense item.

- Phones: Although you can claim for business calls - on either land line or mobile phones you cannot claim line rental on your home phone or personal mobile.

- Journals and memberships: Membership of professional associations are an allowable expense in many instances - the HMRC provide a comprehensive list of those that fall into the allowable category.

Legitimate claims

Whatever expenses you do incur remember you will need to provide receipts. Allowable expenses offer a good way to reduce your tax bill - but they must be legitimate expenses. Good record keeping and claiming only for genuine costs incurred as part of your job are essential. HMRC do provide excellent guidelines and information on what you can claim for and how to ensure your claims are legitimate.

For the self-employed, tax can be a headache. Using an umbrella company or forming a limited company can be an efficient way to manage tax affairs, but ensuring you get the right structure for your business is essential.