With just over a week left until the 31 January self-assessment deadline, make sure you know what expenses you could claim to reduce your tax bill.
Last year, Which? research found more than three in 10 people who do their own tax return don’t know which expenses can be claimed – putting them at risk of paying too much or too little.
Here, we explain which of your expenses are eligible to offset against your tax bill and how these differ depending on whether you’re employed or self-employed.
UPDATE on 25 January 2021: HMRC has announced it is waiving fines for late filers in February. However, the deadline to pay your 2019-20 bill is still 31 January. Read our news story for more.
Why should you claim expenses?
If you’ve had to pay for certain things in order to do your job – be that a new laptop or even just stationery – you may be able to claim tax relief on what you’ve spent.
This means that the tax you’d usually be charged on these items is removed; it doesn’t mean you’ll be able to get the item for free.
The tax that’s removed depends on your income tax band – basic-rate taxpayers can get 20% of the tax back, while higher-rate taxpayers would get 40%.
You can generally only claim tax relief on things that are ‘wholly and exclusively’ used for your job, but there are a few exceptions. For instance, if you use your personal car for work or work from home, then you’re still likely to be able to claim expenses.
Expenses you can claim if you’re self-employed
Self-employed workers are taxed on their annual profit. If you claim expenses for items or services that are necessary to carry out your job, you’re able to deduct the cost of certain purchases, which will in turn reduce the amount of profit and therefore your tax bill.
If you work from home
If you’re claiming tax relief after being forced to work from home as a result of the coronavirus pandemic, you’ll be able to claim on a flat rate of £6 a week through your self-assessment tax return and you won’t need to provide any evidence of your outgoings.
Basic-rate taxpayers will get £60, while those who pay higher-rate tax will be £125 better off for the tax year. Find out more in our story about working from home during the pandemic.
If this flat rate isn’t enough, you’ll need to look at the proportion of your home that’s used for work along with the proportion of time spent working.
For instance, if you exclusively carry out your work in the study – a room which takes up 10% of your home’s total surface area – you’d be able to claim for using 10% of the heating.
However, this would then have to be reduced further to show the proportion of time you spend using it. So, if you work for 35 hours a week, out of a total 168 hours, that’s just under 21%.
This means you’d be able to claim for 21% of the initial 10% slice of the bill. The illustration below shows how this works:
If you work from business premises
It’s a little simpler if you work from an office or other business premises as you can claim the costs of keeping it running – this includes outgoings for heating, lighting, cleaning, water, rent, business rates and general maintenance.
However, you can’t claim expenses for the initial costs of buying the building or for any alterations or improvements. This kind of spending could qualify for the annual investment allowance or capital allowances.
If you have to travel for work
Some work-related travel costs can be claimed as expenses:
- Travel and accommodation while on business trips and if you have to travel between different places of work
- Meals on overnight business trips
- Work vehicle costs, including petrol, car tax, insurance, repairs and servicing.
If you use a private vehicle for work, you can only claim for the proportion of what you spend when it’s being used for work.
You can’t claim for the costs of travelling from your home to work or for the cost of buying a vehicle to make this journey.
If you employ other people
As an employer, there are some employee-related expenses you can claim for, including:
- Employees’ wages and redundancy payments
- Employers National Insurance contributions (NICs)
- Employees’ insurance and pension benefits
- Employees’ childcare provisions
- Training costs.
You can’t claim for the same expenses relating to yourself – that includes your own NICs, income tax, pension contributions and life insurance.
- Find out more: self-employed tax allowable expenses
Tax-deductible expenses if you’re employed
Employed workers can only make expenses claims from HMRC if their employer hasn’t already reimbursed costs or if they’ve had to pay tax on the reimbursement.
If you’re owed less than £2,500, you might be able to get tax relief paid through PAYE via your tax code. This works by increasing the amount of your salary that you can take home before paying tax on it.
If you work from home
As with self-employed workers, if you’re claiming tax relief after being forced to work from home as a result of the coronavirus pandemic, the government has set up a microsite to help workers claim tax relief at a flat rate of £6 a week and you won’t need to provide any evidence of your outgoings.
Depending on the rate of income tax you pay, this means you could be either £60 (if you pay basic-rate tax) or £125 (if you pay higher-rate tax) better off for the tax year, and you can find out more in our story about working from home during the pandemic.
You won’t be able to claim tax relief if you’re working from home voluntarily.
If you travel for work
Items or services you have to pay for while on business trips may be eligible for tax relief.
These include things such as overnight accommodation, public transport costs, parking fees, and food and drink.
If you drive as part of the business trip you may also be able to claim for mileage, even if you use your private car.
The mileage allowance is:
- 45p per mile for the first 10,000 miles
- 25p per mile for anything over 10,000 miles.
You can’t claim tax relief for your usual commute between home and work.
Uniform expenses claims
HMRC has issued a list of industries and occupations where workers are able to deduct a flat-rate allowance to cover the cost of cleaning, repairing or replacing uniforms or protective clothing – as long as your employer doesn’t already give you money for this.
If your profession isn’t listed, it still may be possible to get a flat-rate allowance of £60.
Work-related subscription claims
You can also find a list online of all the eligible fees and subscriptions for professional organisations and learned societies for tax relief – but in order to claim, the membership must be essential for your job.
You won’t be able to claim for any ‘lifetime membership’ subscriptions or any your employer has already reimbursed you for.
- Find out more: tax-deductible expenses
Submit your tax return using the Which? tax calculator
If you haven’t yet submitted your 2019-20 tax return, you could try the Which? tax calculator. It’s an online tool that’s easy to use and totally jargon-free.
You can tot up your tax bill and it will even suggest areas where you might be able to claim expenses that you might have forgotten about.
When you’re finished, you can even use the tool to submit your tax return directly to HMRC.
You can see how it works in the video below.