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Employment Related Expenses

  • Posted by:
  • Admin
  • Tags:
  • Expenses, Tax Relief
  • Posted date:
  • 10-01-2019

When it comes to employee expenses, the general rule is extremely restrictive and has its own logic. As a result of its restrictiveness, we'll look at the actual wording of tax acts, even if it sounds rather challenging.

According to the law, an employee must meet two conditions for him/her to a treat a work expense as an allowable deduction for tax. They are:

  • The employee is allowed to incur and pay as a holder of the employment, and;
  • The amount is incurred as a whole, exclusively and as a must in the performance of their employment responsibilities

What are Employment Related Expenses?

Employees, including most directors, are allowed to claim for expenses that they may have paid personally, which can be set against their income liabilities for that particular tax year. Employees must keep the records of the amount they spend and make their claims to HMRC within 48 months of the end of the specific tax year that the amount was spent.

For each £100 of expenses that an employee can claim, he or she will get a refund of:

  • £20 if you pay taxes using the basics rate
  • £40 if you pay taxes using a higher rate and
  • £45 if you're a higher rate taxpayer

tax planning services

What qualifies for tax relief?

  • Work clothing, uniforms and tools
  • Business mileage claims for using your car on company business matters (doesn’t include commuting)
  • Overnight costs and travel
  • Professional fees that your employment may require
  • Costs incurred for working from home
  • Any expenditure that you incur for work reasons

You cannot claim the above costs if your employer has reimbursed you. If the claims are more than £2,500, the employee will need to use a self-assessment tax return to submit the claims. For claims that are than £2,500, the employee has three choices:

If you've already completed using a self-assessment tax return, you should use the following to make a claim:

  • Complete a P87 form and file by post or online

If you've enjoyed a successful claim in the past and the expenses you incurred are less than £1,000 (£2,500 for professional subscriptions and fees), you can claim using your phone.

If your employer contributed towards any of the above expenses but didn’t cover the entire cost, you're allowed to claim the difference.

Keep in mind HMRC expects:

The expenses you incurred were a must for you and fellow employees doing the same job:

  • You incurred the expenses while actively engaged in your work duties, and not in a crucial but related activity.
  • The expenses you incur must be less than your earnings in that specific job or role (check the HMRC website).
  • The expenses incurred should be exclusively and wholly for the specific employment. It should not be, for instance, for personal reasons, or another job or role.

However, in some cases, a proportion of the cost is allowed, if the employee can specifically associate it with their employment.

HMRC tax return form for self employed