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19 Jan 2022

Could you cut your 2020-21 self-assessment tax bill?

Find out if you're missing out on tax relief for work-related expenses

With just a few days left until the 31 January self-assessment deadline, make sure you've made the most of the expenses and tax reliefs or you'll risk paying too much tax.

While HMRC has recently announced it will waive the late filing charge during February, and late payment charges until 1 April, you'll still be charged interest on the tax you owe from 1 February, so it still pays to hit the official deadline.

Here, Which? explains the expenses and tax reliefs you could be eligible for, and how they differ depending on whether you're employed or self-employed.

How do expenses reduce your tax bill?

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.

If you're self-employed, you can deduct the cost of the items from your profits, which then reduces the amount of tax you'll owe.

If you're employed, 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%.

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Expenses if you're self-employed

The expenses you can claim as a self-employed worker will depend on your circumstances - such as where you work, and whether you employ anyone to work for you.

If you work from home

You can claim tax relief on a flat rate of £6 a week through your self-assessment tax return if you work from home - 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.

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.

If you work from business premises

If you work from an office or other business premises, you can claim what you pay to keep it running. This includes things like 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've travelled for work

You can claim some work-related travel costs as expenses, including:

  • 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, 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 for your commute.

If you employ other people

Employers can claim several employee-related expenses, 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 for yourself - that includes your own NICs, income tax, pension contributions and life insurance.

Expenses if you're employed

Employed workers can only claim expenses from HMRC if they haven't already been reimbursed by their employer, 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.

To claim expenses in this way, you can apply online or submit a P87 form. You'll likely have to provide evidence of what you've paid.

If you work from home due to Covid-19

You can claim tax relief at a flat rate of £6 a week if you've been forced to work from home as a result of the coronavirus pandemic - even if you only had to do this for as little as a day.

The government has set up a microsite to help workers claim, and you won't need to provide any evidence of your outgoings - however, this is only suitable for those who aren't submitting a self-assessment tax return.

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.

If you work from home voluntarily

You won't be able to claim tax relief if you're working from home voluntarily.

If you travel for work

If you have to pay for things while away on a business trip, the costs 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.

If you wear a uniform for work

HMRC has issued a list of industries and occupations where workers can deduct a flat-rate allowance to cover the cost of cleaning, repairing or replacing uniforms, protective clothing or tools - 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.

If you pay for work-related subscriptions

HMRC has also issued a list of professional organisations and learned societies whose fees or subscriptions are eligible for tax relief.

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

Find out how much you owe with the Which? tax calculator

If you haven't yet submitted your 2020-21 tax return, the Which? tax calculator could help.

Our online tool is easy to use, jargon-free and helps you tot-up your tax bill. What's more, 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 use the tool to submit your tax return directly to HMRC.