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Updated: 4 Feb 2020

Almost a third of self-assessment taxpayers could be getting expenses wrong

Find out if you could cut your self-assessment tax bill

Exclusive Which? research has 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.

In a survey of almost 1,300 Which? members, almost a third of respondents said they didn't know what could be included as an expense claim when they were faced with a list of possible bills, items and services.

Not knowing which expenses you can apply to your return could mean you'll end up paying more tax than you need to - while claiming expenses you're not entitled to could land you with a fine from HMRC.

With just over a week left until the 31 January self-assessment deadline, you should make sure you're clued up on what you can and can't claim.

Here, we explain which of your expenses are eligible to offset your tax bill, and how these differ for employed and self-employed workers.

What are tax-deductible expenses?

If you've had to pay for certain things that are necessary for your job, you may be able to claim tax relief on what you've spent.

This means that the tax you would usually be charged on an item is removed; it doesn't mean you'll get the item for free.

If you're a basic-rate taxpayer, you could get a 20% refund on the cost, while higher-rate taxpayers may be able to get up to 40% back.

Generally, you can only claim relief on things that are used 'wholly and exclusively' in relation to your job, but there are a few exceptions. For instance, in cases where you use your personal car for work, or use where you live to work from home.

You'll need to keep records of your expenses in case HMRC asks for proof of what you've spent. While nine in 10 of the people we surveyed said HMRC had never asked for additional information regarding their expenses claims, one person said they had once had to provide seven years' worth of all income and expenses - so be prepared to back up your claims.

The expenses you can claim are different depending on if you're employed or self-employed.

Tax allowable expenses if you're self-employed

If you're self-employed and pay tax by self-assessment, your tax bill is based on your annual profit.

By claiming expenses, you can deduct the cost of certain purchases, which will then lower your profit and your tax bill.

If you use a business premises

If you use an office or other business premises, you can claim for some of the costs of keeping it running.

This includes the costs of heating, lighting, cleaning, water, rent, business rates and general maintenance.

You can't claim for the initial costs of buying the building, or for any alterations or improvements. These kinds of spending may qualify for the annual investment allowance or capital allowances.

If you work from home

It's a little more complicated to claim expenses for working from home, as you won't be using the space solely for business purposes.

As a result, you can only claim for a proportion of your bills, depending on how much of your home is used for work, and how much of your time you spend working.

For instance, say 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, but then reduce this further to show the proportion of time you've spent using it.

So, if you work for 35 hours a week, out of a total 168 hours, that's just under 21%. That means you'd be able to claim for 21% of the initial 10% slice of the bill.

If you travel for work

You may be able to claim expenses for some work-related travel costs, which include:

  • travel and accommodation on business trips, and between different places of work
  • work vehicle costs, such as petrol, car tax, insurance, repairs and servicing.

If you own the vehicle privately, you can only claim for the proportion of what you spend when it's being used for work.

You can't claim for the cost of travelling from home to work, for buying a vehicle to do this journey, or for your meals - although you may be able to claim a 'reasonable amount' for breakfast and evening meals when on an overnight trip.

If you employ other people

There are some employee expenses you can claim back for, including:

  • employees' wages and redundancy payments
  • Employer's National Insurance contributions (NICs)
  • employees' insurance and pension benefits
  • employees' childcare provisions
  • the cost of training.

However, when it comes to your own salary, NICs and income tax, pension costs and life insurance, you can't claim expenses.

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Tax-deductible expenses if you're employed

If you're employed, you can only make an expenses claim if your employer hasn't already reimbursed you - or if you've had to pay tax on the reimbursement.

If you're owed less than £2,500, you might be able to get tax relief in increments through PAYE. HMRC will adjust your tax code so you'll take home a larger proportion of your salary.

You won't need to submit a tax return to do this - you can just apply online or print and post form P87.

But if you usually pay tax by self-assessment, or your expenses claim is worth more than £2,500, you'll have to submit a tax return.

If you work from home

If you work for an employer from your home, it's possible to claim tax relief on a proportional amount of expenses for things such as heating, lighting and telephone costs.

If your claims exceed £4 a week, or £18 a month, you must be able to provide evidence of what you've spent.

Your employer may choose to contribute to your expenses - but they don't have to. The same payment threshold applies, and you won't have to pay income tax or National Insurance on the tax relief you receive from your employer.

You can't make any claims if you're working from home voluntarily.

If you travel for work

Any items or services you have to pay for while on a business trip could be eligible for tax relief. These include things like:

  • public transport costs
  • overnight accommodation
  • food and drink
  • congestion charges and tolls
  • parking fees
  • business phone calls
  • uniform and equipment.

You can also claim for mileage, whether you use your private car or a company car. HMRC has an approved mileage allowance in this case:

  • 45p per mile for the first 10,000 miles
  • 25p per mile for 10,000+ miles.

You can't claim for your usual commute between home and work.

If you wear a uniform

HMRC has agreed on a list of occupations where workers can deduct a flat-rate allowance on the cost of cleaning, repairing or replacing protective clothing and uniform.

If your profession isn't listed, you may still be able to claim a standard annual amount of £60.

If you have work-related subscriptions

HMRC also has a list of fees and subscriptions to some professional organisations that are eligible for tax relief - but the membership must be necessary to do your job.

You can't claim for lifetime membership subscription, or for any fees or subscriptions your employer has already paid for.

Get help to submit your 2018-19 tax return

The deadline to submit your 2018-19 self-assessment tax return is looming. You have until midnight on 31 January to send your return to HMRC - failing to send it on time could mean you'll face a late penalty.

The Which? tax calculator is an online self-assessment tool that can calculate the tax you'll owe, make suggestions for savings, and submit your return directly to HMRC.