Claiming work-related expenses is one of the most effective ways to reduce your tax liability and potentially secure a bigger tax refund. However, many taxpayers are unaware of the full range of expenses they can claim or the correct procedures to follow. This guide provides a comprehensive explanation of how to identify, calculate, and claim work-related expenses to maximise your tax refund.
Understanding Work-Related Expenses
Work-related expenses are costs you incur in the course of performing your job. To be eligible for a tax deduction, the expense must:
- Have a direct connection to your employment duties.
- Not be private or domestic in nature (such as ordinary commuting costs or personal clothing).
- Not have been reimbursed by your employer.
Understanding these basic requirements is essential before you start claiming expenses on your tax return.
Common Categories of Work-Related Expenses
The UK tax system recognises several categories of work-related expenses, and each has its own rules for claiming. Let’s explore the most common types:
1. Travel Expenses
Travel expenses are deductible if they are incurred wholly, exclusively, and necessarily in the performance of your duties. These include:
- Travel between different work locations (excluding commuting from home to a permanent workplace).
- Use of your own car for business journeys (you can claim Mileage Allowance Relief or actual expenses like fuel, insurance, and maintenance).
- Parking fees, tolls, and public transport fares when travelling for work.
2. Uniforms and Work Clothing
If your job requires a specific uniform, protective clothing, or branded attire that you must wear for work, you can claim tax relief on the costs of buying, repairing, or cleaning them. Ordinary clothing, even if you wear it to work, is not deductible.
3. Professional Fees and Subscriptions
If you pay membership fees to a professional body that is approved by HMRC and the membership is relevant to your job, you can claim a deduction. For example, accountants paying ICAEW fees or engineers paying membership dues to a relevant institute.
4. Tools and Equipment
Costs for tools or equipment that are necessary for your job (e.g., laptops, specialist tools) can be claimed. If the item is used partly for private use, you must apportion the expense and only claim the work-related portion. Capital allowances may apply if the item is costly and will be used over several years.
5. Working from Home Expenses
If you work from home and your employer does not reimburse you, you may be able to claim a proportion of home expenses such as electricity, heating, broadband, and phone bills. A simplified flat rate allowance is also available, which reduces the need to keep detailed records.
How to Calculate Your Deductions
Accurately calculating your deductions is crucial to avoid errors and potential issues with HMRC. Here’s how to do it properly:
- Keep detailed records and receipts for every expense you intend to claim.
- Calculate the portion of the expense that relates exclusively to your job (e.g., 70% of broadband if 70% of your usage is work-related).
- Use HMRC-approved rates where available, such as Mileage Allowance Relief at 45p per mile for the first 10,000 miles and 25p thereafter.
- Check the specific guidance for each expense type to confirm eligibility.
How to Claim Work-Related Expenses on Your Tax Return
You can claim work-related expenses through your Self-Assessment tax return or, in some cases, by submitting a P87 form if you’re employed under PAYE and your expenses are less than £2,500.
Claiming Through Self-Assessment
If you already complete a Self-Assessment tax return (SA100), you can include your expenses in the employment section (SA102) or self-employment section, as applicable. Make sure to:
- Provide accurate details of each expense claimed.
- Keep evidence (receipts, invoices, mileage logs) for at least 22 months after the end of the tax year, or five years and ten months if you submit a Self-Assessment return.
Claiming Through a P87 Form
If you’re employed and don’t usually complete a tax return, you can submit a P87 form online or by post. You’ll need to provide details of your employer, the nature of the expense, and the amounts claimed. HMRC may ask for evidence, so keep copies of all supporting documents.
Timing Your Claims
You can make a claim for work-related expenses up to four years after the end of the tax year in which you incurred the expense. For example, for the 2020/21 tax year (ending 5 April 2021), you have until 5 April 2025 to submit a claim.
Tips to Maximise Your Tax Refund
Here are some additional tips to help you get the largest refund possible:
- Bundle small claims: If your work-related expenses are modest, consider adding them together to exceed the minimum claim thresholds.
- Review all categories: Many people overlook items like professional subscriptions or mileage. Review your annual spending carefully.
- Seek professional help: Tax advisers can help identify expenses you might miss and ensure claims are accurate and compliant with HMRC rules.
Common Mistakes to Avoid
Some common mistakes include:
- Claiming personal expenses as work-related: Only costs incurred wholly, exclusively, and necessarily for your job are deductible.
- Not apportioning mixed-use items: If you use equipment for both work and personal reasons, you must only claim the work-related portion.
- Failing to keep receipts: HMRC may reject claims without proper evidence.
Conclusion
Claiming work-related expenses is a legitimate and valuable way to reduce your taxable income and secure a bigger tax refund. By understanding which expenses are eligible, keeping good records, and submitting claims properly through Self-Assessment or the P87 form, you can ensure you get the maximum benefit. Don’t miss out on tax savings—start reviewing your work-related expenses today!
