Don’t pay for expenses that your employer should be paying for – here’s how and when to claim a tax deduction.
Tax Relief for employee expenses
As an employee, you may 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 on your expenses.
Expenses may include the cost of your train ticket or petrol 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 a reimbursement is not forthcoming, you may be able to claim a tax relief.
What expenses can I, an employee, claim tax relief on?
• expenses you have paid yourself without any reimbursement.
• expenses your employer has reimbursed but you were taxed on the reimbursement.
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 chose 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’.
In the performance of the job v 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 travelling 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 necessarily, to enable you to do your job.
Expenses for which tax relief for employees may be claimed
A deduction can be claimed for any expense that meets the ‘wholly, exclusively and necessarily’ test.
Examples include professional fees and subscriptions, travel and subsistence costs, additional costs of working from home, cost of repairing tools or specialist clothing, phone calls, etc.
Where the expense is reimbursed by your employer, a deduction cannot be claimed as well; however, the amount reimbursed is not taxable and is ignored for tax purposes.
Using your own car
If you use your own car for business travel, your employer can pay tax-free mileage payments up to the approved rates. For cars and vans, this is 45p per mile for the first 10,000 miles in the tax year and 25p per mile for any subsequent miles.
When can you claim tax relief?
If your employer does not pay mileage allowances or pays less than the approved amount, you can claim tax relief for the difference between the approved amount and the amount paid by your employer.
Flat rate expenses
Employers in certain industries may claim a flat rate deduction for certain expenses in line with rates published by HMRC (see www.gov.uk/guidance/job-expenses-for-uniforms-work-clothing-and-tools#claim-table). Although claiming the flat rate removes the need to keep records of actual costs, employees can claim a deduction based on actual costs where this is more beneficial.
How to claim
There are different ways to make a claim depending on your circumstances. Claims can be made online using HMRC’s online service https://www.tax.service.gov.uk/claim-tax-relief-expenses/who-claiming-for , by post on form P87, by phone or, where a self-assessment return is completed, via the self-assessment return.