9 WAYS TO CUT YOUR TAX BILL – allowable expenses for Employees
If you are employed, you are limited in what you can offset against Income Tax. However, there are still a few useful tips to reduce taxable income:
1. Mileage allowances
If you use your personal car for work and the mileage allowance that your employer pays you is less than the HMRC rate, you can claim the balance. The first 10,000 business miles can be claimed at a rate of 45p per mile. Over 10,000 miles the allowable HMRC rate drops to 25p per mile. Additionally, you can claim 24p per business mile for motorcycles and 20p per mile for bicycles. If you are paid less than these rates by your employer, you can claim the difference on your self-assessment return.
2. Travel and overnight expenses
If you have to travel for your work you may be able to claim tax relief on the money you have spent on public transport, food, parking, or overnight accommodation.
3. Professional fees and subscriptions
If you are a member of a professional body and pay annual fees, you will be able to offset them against tax. You can claim tax relief on professional fees, membership fees, subscriptions, if they are necessary or beneficial for your work. Union fees do not always count. Please, check the HMRC list of approved memberships here before claiming tax back.
4. Charitable donations.
If you are a higher rate taxpayer and have made gift aided charitable donations, you can claim tax relief on them. For example, if you gave £1,000 to Children in Need and you are a 40% taxpayer, you can claim £250 against the tax bill.
Most employer-organised Give-As-You-Earn schemes are paid out of gross salary but not always. The same is with pension contributions. Most are paid out of gross salary, but if not, you can claim back all the tax that you paid on the extra pension contribution. Check this with your employer.
5. Uniforms and specialist clothing
If you pay for your uniform or specialist protective clothing, the cost can be deducted against taxable income. You can claim what you have spent (make sure to keep receipts). Alternatively, you can claim flat rate deductions. HMRC has agreed amounts that are typically spent each year by employees in different occupations. You can check this information here.
6. Working from home
If you are required to work from home by your employer, you are entitled to claim a home working allowance. It helps with increased household costs because of business use, such as phone, electricity and gas. Currently, allowable amount you can claim is £4 per week.
7. The marriage allowance – save up to £230 each year
Marriage allowance can be used if one person in a couple is a low earner. Since April 2015 couples in which one person pays no tax because their income is less than the personal allowance (in 2017-2018 tax year – £11,500) have been able to transfer £1,500 of that allowance to their tax-paying partner. Currently the rebate is worth £230 a year. It only applies if the earning partner (married or civil partnership) earns £11,501-£45,000. Applicants can backdate their claim to the previous tax years, and receive a payment of up to £662. You can claim marriage allowance here.
8. Tools replacement
You can claim tax relief on the maintenance/ cleaning/ replacement of equipment. However, you cannot claim for the initial cost of buying these items. That is, of course, only if your employer did not already compensate you for these costs. To find out more about this relief you will need to check with HMRC or your accountant.
9. Capital Allowances
If you have to buy equipment for work that your employer does not pay for, you may be able to claim capital allowance tax relief. The example HMRC gives is of a filing cabinet purchased by an employee for work, but not paid for by the employer.
Note. You can only claim relief on things that are used just for your work and which you do not use privately. Also, you cannot claim relief on things which were already reimbursed by your employer. You must keep records of what you have spent, and claim within 4 years of the end of the tax year that you spent the money.
How to claim?
The way you claim tax relief on expenses depends on the amount you’re claiming for.
You can make your claim up to £2,500 using:
- a Self-Assessment tax return if you already fill one in
- online or by printing and posting form P87 if you don’t already fill in a tax return
- by phone if you have had a successful claim in a previous year and your expenses are less than £1,000 (or £2,500 for professional fees and subscriptions)
Claims over £2,500 can only be made by using a Self-Assessment tax return.