Tax relief - Which expenses are deductible?
Whether you're an employee or working as self-employed there are various tax relief expenses you can claim back. Which expenses are deductible and which aren't? Here's our simple guide to tax relief for employees and the self-employed.
Tax relief for employees
Here's what you can and can't claim tax relief on, as an employee.
Equipment for work
You might be able to get tax relief if you've used your own money for work equipment, but not if your employer has already given you an alternative. You can't claim the cost of work clothing.
If you've already claimed expenses from your employer you can't claim tax relief on buying, repairing or replacing small tools, or on buying, cleaning, repairing or replacing specialist work clothes (which you also can't claim the cost of in the first place).
Business miles, fuel, travel and overnight stays
You might be able to claim tax relief when you use your own car or van for work, or any fuel you buy for a company vehicle. But you can't claim for travelling to work unless it's to a temporary location.
You may be able to claim for subsistence costs while travelling for work, including public transport, hotels, food and drink, tolls and congestion charges, parking, phone calls, faxing and copying.
Fees and subscriptions
You can reclaim tax on fees and subscriptions for approved professional organisations, when you have to be a member and it's relevant to your job. You can't claim tax back when the organisation isn't HMRC approved, it's a lifetime subscription or your employer has already paid.
Bills for home working
You might be able to claim home working expenses like household bills, like phone calls from your landline and extra energy costs. You can't claim for services you'd use anyway, like rent and internet access.
Tax relief for the self-employed
Here's some guidance about what you can and can't claim as a self-employed worker.
Your office, property and equipment
Allowable expenses are stationery, rent, rates, energy, utilities, security and insurance, all for business use. Equipment you use in your business is an allowable expense if you use cash accounting and a capital allowance for traditional accounting.
If you buy a premises you can't claim expenses or allowances for the purchase itself, repairs, maintenance or equipment. You can claim allowable expenses on alterations you need to make to install or replace equipment under cash accounting, and as a capital allowance under traditional accounting. The same goes for various integral parts of the premises, for example the hot water system.
Business vehicles and travel
Business expenses on numerous aspects of travel are claimable against tax, including insurance, repairs, servicing, fuel, parking, hire, licence fees, fares, hotels and meals. You can't claim for fines or everyday travel between home and work.
If you use traditional accounting you can claim the cost of buying a vehicle as a capital allowance. For cash accounting, it's a capital allowance when you don't use simplified expenses. Other vehicles count as an allowable expense.
You can only claim allowable expenses for business uniforms, protective clothing and, if you're in the entertainment business, your costumes.
You can claim allowable business expenses for salaries, bonuses, benefits, pensions, benefits, agency fees,
subcontractors and National Insurance, but not for domestic help.
Items you will re-sell
You can claim allowable expenses for business stock, raw materials and the direct costs of producing goods, but not for the depreciation of equipment.
Accountant, legal, insurance and professional fees
Allowable expenses include accountants, solicitors, surveyors and architects, and professional indemnity insurance premiums
You can't claim tax relief on the legal fees involved in buying property and machinery, which come under a capital allowance with traditional accounting. Nor can you claim relief on fines when you've broken the law, or bank and credit card charges
You can claim for business insurance
You can claim for business bank account, overdraft and credit card charges, interest on loans and HP arrangements, leasing and alternative finance, for example Islamic finance. Cash accounting means you can claim as much as £500 for interest and bank charges, but you can't claim on loan repayments or overdrafts
If someone doesn't pay what they owe, traditional accounting means you can claim it against tax. But you can only write the debts off when you're certain the customer will never pay
You can't claim for debts not included in your turnover, or those involving the disposing of fixed assets like land and machinery, or for inaccurately-calculated bad debts – you have to be precise
You can't claim against bad debts with cash accounting because you never got the money in the first place
Advertising and marketing
You can claim allowable expenses for business advertising, mailshots, any free samples you give away and the costs of having a website. But you can't claim for entertaining clients, suppliers and customers or for event hospitality.
Subscriptions to bodies and journals
You can claim for subscriptions to business-related trade and professional journals and orgnisations. But not for payments to political parties, gym membership or charity donations. In some circumstances you can claim for money you've spent on sponsorship.
'Simplified expenses' make everything easier. They're flat rates used for tax relief on vehicles, working from home and living on the business premises expenses, and they apply to several of the above.
Need help with claiming tax relief?
We'll make sure every t is crossed and every i dotted, so you claim everything you're entitled to claim against tax while remaining strictly legal.
If you would like to find out more about 'Tax Relief Expenses' please contact Karen@abenbookkeeping.co.uk or call her on 01273 661913