WORK EXPENSES: As an employee, you have the right to claim tax relief on several different types of outlay.
It is not uncommon to use your own money for things you need in your job. It includes common outlays such as clothing, tools, and travel expenses.
But, to claim the special tax relief for employees, you must have paid taxes in the same year that you spent the money. The rate of taxation you pay determines how much relief you can claim.
An Example: You spend £80 on work tools and pay the 20% tax rate. So, the amount of tax relief available would be £16.
There are some limitations on what work expenses qualify for reliefs. They must be things used for work only, and cannot be anything used in your personal life. Even so, they will only qualify if your employer does not provide an alternative.
When employees claim tax relief they must keep records of what they spend on expenses for work. The claim for relief must get made within four (4) years of the end of the tax year that the money got spent.
Note: The rules of tax relief for employees do not allow a claim if your employer pays back the money you spent.
How Employees Claim Tax Relief
The amount of reliefs you claim for determines the method used to claim tax relief on work related expenses.
Tax Relief Claims over £2,500
You must use the Self Assessment system for claims more than £2,500. That means you may need to register for Self Assessment before claiming the tax relief. Once you have registered you will receive a letter informing you of the next step.
Tax Relief Claims up to £2,500
There are several ways to make a claim when the amount claimed is not over £2,500. You can either:
- Use a Self Assessment tax return if you are already registered and fill one in on a regular basis.
- Make a claim online using your Government Gateway account.
- Print and post ‘form P87 Tax relief for expenses of employment‘ (if you do not send in tax returns).
- Make a phone call to HMRC office. This only works if you had a successful claim in a previous year and the expenses are under £1,000. The limit increases to £2,500 for professional fees and subscriptions.
Getting the Tax Relief
The way employees receive their tax relief will depend on the actual amount they are claiming for.
Claims up to £2,500
What if the claim is £2,500 (or less) for the tax year? In this case, HMRC usually make any adjustments required through a list of tax codes for the current tax year.
Often, employees will claim an estimated amount of tax relief. When this happens HMRC will review it at the end of that tax year. Any adjustments needed get made through the tax code for the following year.
Claims over £2,500
What if the claim is for more than £2,500 for the tax year? In this case, HMRC would apply relief through the tax code for the current and the following tax years. HM Revenue and Customs would also send you a tax return to fill in.
Note: HM Revenue and Customs also check the tax calculations made for the previous year. Check how much tax relief you can get on your own work-related expenses.
Tax Relief on Work Clothes, Uniforms, and Tools
Some typical examples of what you might be able to claim tax relief on the cost of include:
- Replacing or repairing small tools that you need to carry out your job (e.g. an electric drill or scissors).
- Cleaning, replacing, or repairing specialist clothing (e.g. safety boots or a uniform).
Note: You might need to buy other specialist equipment to use in your job. If so, you may be able to claim them as capital allowances instead. But, you cannot claim tax relief on the initial cost of buying clothing or small tools for work.
What is Claimable?
There are two methods of claiming for this type of tax relief. If you keep receipts, you can claim for what you spend. If not, you might use the ‘flat rate deduction‘ scheme instead.
HM Revenue and Customs agree the expenses fixed by the Treasury for ‘flat rate deductions’. They are typical amounts spent each year by employees in different occupations. For example, all agricultural workers can get a deduction of £100 from the 2008/09 tax year onward.
There is a standard annual amount of £60 in tax relief for employees with an occupation not on the list. You would not need to keep records of what you paid for when claiming through a flat rate deduction.
Tax Relief on Business Mileage, Fuel, and Electricity Costs
Using fuel or electricity on business means you might be able to claim tax relief. As a rule, whether you use your own vehicle, or a company vehicle, will determine what you can make a claim.
Note: Unless you are travelling to a temporary place of work you will not be able to claim mileage to and from work or your job.
If You Use Your Own Vehicle
Using your own vehicle for business may qualify you for ‘Mileage Allowance Relief‘. First, add up the business mileage used in the tax year. Then, multiply it by the approved mileage rates to get your claimable amount.
If You Use Multiple Vehicles
You can combine the business miles if you use more than one vehicle as long as they are of the same vehicle type. But, if you use different types of vehicles you must calculate them ‘separately’.
Approved Mileage Rates
- Cars and vans: 45p for first 10,000 business miles in the tax year and 25p for each business mile over 10,000 in the tax year.
- Motorcycles: 24p for first 10,000 business miles in the tax year and 24p for each business mile over 10,000 in the tax year.
- Bicycles: 20p for first 10,000 business miles in the tax year and 20p for each business mile over 10,000 in the tax year.
As a rule, you can claim the full approved amount of Mileage Allowance Relief. That is providing you do not get mileage allowance from your employer.
You can claim relief on the difference if what you get from your employer is less than the approved amount. But, you pay tax on the difference if you get more than the approved amount from your employer.
Note: You need to keep records of all the dates and mileage clocked up in your work journeys.
If You Use a Company Car for Business
Tax relief is claimable on the money spent on fuel or electricity for business trips in a company car. But, you must keep records showing the actual cost of the fuel or electricity you bought or used.
Note: Some employers will reimburse some of the money. In this case, you can claim tax relief on the difference.
Get Tax Back for Working at Home
Those who work at home on a regular basis may get some tax back on the bills paid to do so. But, you can only claim it for things related to your work. Examples include the extra cost of gas and electricity for the work area or business phone calls.
You will not be able to claim for things used for both private and business use. Typical examples would include a broadband Internet access or your rent payments.
There is no need to produce records for tax relief claims up to £4 per week (or £18 a month). But, you will need to produce evidence of what you spent if you are claiming for more than £4 per week.
Working at Home Voluntarily
You can have an agreement with your employer to work at home in a voluntary ‘homeworking arrangement‘. In this case, the employer may contribute towards your home expenses. But, there is no legal requirement for them to do so.
Thus, your employer may contribute up to £4 a week (£18 a month) towards your expenses. In this case, you would not need to provide receipts. But, if your employer contributes over £4 a week you would need to be able to show what you spent on top to get the tax relief.
Note: You do not need to pay National Insurance contributions or tax on the amount paid by your employer. But, working at home ‘voluntarily‘ when your employer does not contribute to the expenses does not qualify for tax relief on what you spent.
Tax Relief on Travel Costs and Overnight Expenses
Some reliefs apply if you travel for your work. You might get tax relief on ‘subsistence’ (cost or money you spend on food or overnight expenses). Expenses that apply for tax relief from a business journey include:
- Business phone calls, fax and photocopying costs.
- Congestion charges and tolls.
- Food and drink.
- Hotel accommodation if you have to stay overnight.
- Parking fees.
- Public transport costs.
Tax Relief on Professional Fees and Subscriptions
You may reclaim tax on fees or subscriptions paid to some ‘professional bodies approved for tax relief‘. This only applies if you need the membership to do your job or it helps you in your work.
The professional organisations must be HMRC approved to claim tax back on fees or subscriptions. Likewise, HM Revenue and Customs will not allow tax reclaims on:
- Fees or subscriptions you did not pay for yourself (e.g. your employer pays for them).
- Lifetime membership subscriptions.
Note: Contact the professional organisation to confirm how much tax you may be able to claim back.
Claim Tax Relief on Buying other Equipment
As a rule, you can make a claim for tax relief on the full cost of any ‘substantial’ equipment you need to buy for your work. It should qualify for a business capital allowance called ‘annual investment allowance‘.
There is a different way of claiming for small items of work related equipment. The distinction is usually whether it is likely to last less than two (2) years (e.g. power tools and uniforms).
What if your employer pays you money for the equipment item? You should reduce the amount that you claim tax relief on by the same amount of money that your employer pays to you.
Note: Employees cannot claim capital allowances for work vehicles (e.g. cars, bicycles, or motorbikes). Even so, in some cases you can claim for fuel costs and business mileage.