When you are self-employed, you can claim back any expenses you make in order to carry out your work and set these against your profits. This helps reduce the amount of tax you pay.
What is less well known is the fact that employees can also claim some expenses that are paid out as they work in order to reduce their tax.
What expenses can be claimed?
The types of expenses that can be claimed are listed below:
Small tools, uniforms and protective clothing
You can claim the cost of repairing or replacing small tools used for your job. You can also claim for repairing, cleaning or replacing protective clothing or uniforms needed for your job. You cannot however reclaim the original cost of purchasing these items. If you buy any large pieces of equipment, you can claim capital allowances on them. Please use this link to see our blog on capital allowances.
You can either claim the amount spent, (for which you will need to keep your receipts) or claim a flat rate allowance from HMRC. The list of flat rate allowances you can claim depending on your job can be found by clicking here. If your occupation is not listed you can still claim £60 per year.
Business mileage and fuel
If you use your own vehicle for business travel (not including travel between your home and a standard place of work), you can claim 45 pence per mile for the first ten thousand miles and 25 pence per mile for every mile after. Motor bikes claim 24 pence per mile while bicycles claim 20 pence per mile. You will need to combine vehicle mileage if you have multiple vehicles of the same class above.
If you use a company car, you can claim any money you spend on fuel you purchase for business trips.
Travel and overnight expenses
For any business travel (excluding between your home and a standard place of work), you can claim expenses such as public transport, food and drink, accommodation, parking fees and road tolls as well as business phone calls, fax and photocopier costs.
Professional fees and subscriptions
You can claim subscriptions to professional bodies, but only if you must be a member in order to work or if it is helpful to your work. You cannot claim these fees back if the organisation is not approved by HMRC or if you pay for a life member subscription.
The list of approved organisations can be found here.
Working at home
If you regularly work from home, you may be able to claim back a portion of expenses from your home. You can only claim for relevant expenses, such as electricity and gas for your work area and business phone calls.
You cannot claim for expenses that are both used for personal and business use, such as broadband and rent. If you claim up to £208 per year, you will not need to keep any receipts. If you claim more than £208 per year, you will need to have evidence of the expenses claimed.
How to claim
If you fill in a self-assessment tax return, you will fill this information in on the employment pages of your tax return. If you are claiming up to £2,500 worth of expenses, you can fill in a form P87 or claim online. For amounts over £2,500, you will need to register for self-assessment and fill in the employment pages of the tax return.
Receiving the tax relief
If your claim is for £2,500 or less, HMRC will usually adjust your tax code for the current tax year. If you claim estimated amounts, HMRC will review this and apply any relief to the following year’s tax code.
If you claim more than £2,500, HMRC will spread any relief over the current and following tax years’ codes and send you a self-assessment tax return to fill in. They will also check through your tax calculations in the previous year.
If you would like to have more information regarding the above or with payroll and expenses in general, please do not hesitate to contact us.