A Guide On Tax Relief For Employment Expenses
As an employee, you may sometimes spend your own money on things that are related to your job. Where this is the case, you may be able to claim tax relief back on your job-related expenses.
Expenses may include the cost of your travel i.e train tickets, fuel to visit a supplier, or purchasing stationery or small tools which are used in your job.
Employers will frequently reimburse you for any expenses that you incur, but where such reimbursement is not forthcoming, you may be able to claim tax relief.
The Employment Expenses Test
Employment expenses are deductible only if they are incurred ‘wholly, exclusively, and necessarily in the performance of the duties of the employment.
The test is a harsh test to meet the ‘necessary’ conditions. This means that ‘each and every’ jobholder would be required to incur the expense.
Consequently, there is no relief if the expense is not ‘necessary’ and you choose to incur it (even if the ‘wholly and exclusively’ parts of the test are met).
The rules for travel expenses are different but broadly operate to allow relief for ‘business travel’.
Expenses Incurred In the performance of the job Vs putting the employee in a position to do the job
A distinction is drawn between expenses that are incurred in actually performing the job and those which are incurred in putting yourself in the position to do the job.
Expenses incurred in traveling from the office to a meeting with a supplier and back to the office are incurred in performing the job.
By contrast, childcare costs or home-to-work travel are incurred to put you in a position to do your job.
Relief is available only for expenses incurred as part of your job, and not for those which incurred, albeit arguably necessary, to enable you to do your job.
What Employment Expenses Can I, An Employee, Claim Tax Relief On?
As an Employee, The expenses that you may be able to claim fall into two categories
• Expenses you have paid yourself without any reimbursement.
• Expenses your employer has reimbursed but you were taxed on the reimbursement.
Tax Reimbursement For Business Travel
You can claim on the mileage that has not been reimbursed if you use your own car or a company car for work, up to the HMRC-approved mileage allowance.
If you have been reimbursed less than the pre-approved amount, you can claim relief on the difference between what your employer paid and the HMRC rate.
You can’t claim tax relief on mileage used for commuting between your home and your normal workplace, but you might be able to claim on journeys to a temporary workplace. Our table below explains what you can claim.
HMRC Mileage Allowance Tax Relief:
45p per mile – Mileage allowance for first 10,000 miles
25p per mile – Mileage allowance for 10,000 miles and over
Tax Relief On Business Trips
You can claim tax on reasonable expenses encountered as a result of business trips, including:
· Public transport costs
· Overnight accomidation
· Food and drink
· Congestion charges and tolls
· Parking fees
· Business phone calls, fax and photocopying costs
· Uniform and equipment
If these expenses have been reimbursed by your employer, you’ll only be able to claim them if the reimbursement was taxed.
Tax Relief On Work Uniform Expenses
You can’t claim for the initial cost of buying a uniform.
However, the cleaning, repairing, or replacing of protective clothing and uniform necessary for your job is eligible for tax relief. This is sometimes referred to as Uniform Tax Allowance.
In some cases, HMRC has agreed that workers in certain occupations can deduct a fixed flat-rate allowance (FRE) The current list of occupations is set out by HMRC on gov.uk.
· Agricultural workers
· Airline pilots and cabin crew
· Firefighters, police officers, and healthcare staff in the NHS
· Prison staff
You can also claim for what you’ve spent, if it’s more than the flat rate, provided you keep all of the receipts.
You may still be able to claim a standard annual amount of £60 in tax relief if your occupation isn’t listed. So, if you pay basic rate tax at 20%, you could claim £12 tax relief on the total £60 flat-rate deduction.
Tax Relief On Specialist Tools and Protective Equipment
Generally, employees are not entitled to tax relief against the cost of work clothing, though there are exceptions.
If you work in a sector where protective clothing is necessary (such as the building trade or in metalworking) you’ll need some or all of the following:
You will also be entitled to tax relief if you are expected to pay for all costs of repair, cleaning, or replacing the specialist clothing. You may not claim for the initial outlay of purchasing the clothing.
You will also be entitled to tax relief against any tools you must buy to be able to perform your job. For example, as a hairdresser your employer may expect you to purchase your own scissors; this tax relief will also apply against maintenance and replacement costs.
Tax Relief On Professional Membership & Subscription fees expenses
Fees and subscriptions to some professional bodies are eligible for tax relief if membership is necessary to do your job. They have to be on the list approved by HMRC.
You can’t claim back fees or subscriptions for:
· Lifetime membership subscriptions.
· Fees or subscriptions you haven’t paid for yourself – for example, if your employer has paid for them.
Tax Relief If You Work From Home
You may be able to claim tax relief on some of the expenses incurred as a result of working at home regularly, such as heating, lighting, and telephone costs.
You can only claim for things to do with your work, and not for those that might relate to both personal and work use – such as rent or broadband access.
For claims over £6 a week, you’ll need to provide evidence of what you have spent.
If you work at home voluntarily, you can’t claim tax relief on what you’ve spent. Your employer may still choose to contribute to your expenses, but they’re not obligated to.
The same rules apply for the amount of tax relief you receive – if your employer contributes up to £6 a week towards your expenses, you won’t need to provide receipts. Any more than this, and you’ll need to be able to show what you’re claiming tax relief on.
You won’t have to pay tax or National Insurance contributions on the tax relief you receive from your employer.
What Is The Maximum Tax You Can Claim For Work-Related Expenses?
The maximum amount you can claim back if you are claiming tax relief through PAYE is £2,500
You must use a self-assessment tax return if you’re claiming for relief over £2,500 and may need to have receipts as proof of the expenses.
Are Professional Licensing Fees Tax Deductible?
Yes you can claim tax relief on:
· Professional membership fees, if you must pay the fees to be able to do your job · Annual subscriptions you pay to approved professional bodies or learned societies if being a member of that body or society is relevant to your job
You cannot claim tax relief on life membership subscriptions, or for professional membership fees or annual subscriptions you:
· Have not paid yourself (for example if your employer has paid for them)
· Have paid to professional organizations that are not approved by HMRC
Your organization can tell you how much tax you’re allowed to claim back.
Can You Claim Unreimbursed Employment Expenses From a Previous Year? Are Such Claims Tax-Deductible?
Yes, you claim back unreimbursed employment expenses for up to 4 years from HMRC.
As we are now in the 2021/22 tax year, you can claim for all work-related expenses you may have incurred since April 2017.
How Can You Claim Tax Relief For Job/Employment Expenses?
How Long Does HMRC Take to Process Any Employment Expense Claims?
Normally HMRC processes work expenses claims within 6-8 weeks, but during the pandemic, this turn-around time has increased to 3 to 4 months for some claims.
We are seeing the time taken reduced recently as more staff are being put back on processing claims from the Furlough and business grants duties.
Where Can I Find More Information About Claiming Employment Tax Relief?
There is more information in HMRC’s employment manual on GOV.UK about employment expenses incurred by employees and their reimbursements. In addition, HMRC provide details on GOV.UK of how to get allowances and reliefs – the method can vary depending on whether or not you complete a Self Assessment tax return. HMRC’s Employment Income Manual contains technical details of deductible expenses for employees, including an A to Z guide: see EIM32400.