Sole trader or Ltd company?
For freelance creatives, the rough threshold is £50K profit. Below that, sole trader is usually simpler and tax-similar. Above £50K, a Ltd company often saves tax — but adds admin (annual accounts, Corporation Tax, dividends).
The decision also depends on:
- Your client base: some agencies and brands prefer to engage Ltd companies for IR35 reasons.
- Pension and retirement: Ltd company pension contributions are very tax-efficient.
- Mortgage plans: Ltd company directors face slightly trickier mortgage applications; specialist lenders exist.
- Whether your partner could be a shareholder: can split dividends and use both personal allowances.
Allowable expenses for freelance creatives
- Equipment: cameras, lenses, computers, monitors, drawing tablets — capital, claimed via AIA.
- Software: Adobe, Figma, Notion, Frame.io, etc — immediate expense.
- Studio rent or use-of-home.
- Models, props, sets, location fees for shoots.
- Travel for shoots and meetings (not commute).
- Subsistence on overnight shoots/jobs.
- Subcontractors (other freelancers you hire on a project).
- Insurance (PI, equipment, public liability).
- Professional memberships (BIPP, AOI, CIM, etc.) and continuing development courses.
Frequently asked questions
Can I claim my home studio as an expense?+
Yes. Use the £26/month flat rate (101+ hours/month) or apportion actual costs (mortgage interest, council tax, utilities) by rooms used and time used. Be careful: a room used exclusively for business may have CGT implications when you sell.
What if I'm paid in equity or in-kind?+
Equity received as payment for services is taxable as income at the market value when received. In-kind goods (e.g. product gifts beyond samples) may also be taxable. A specialist accountant will help you value and report correctly.
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