⚠️ This is a news story and may not be up to date. You can find the date it was published under the title. Our Tax Guides feature the latest up-to-date tax information and guidance.
Universal credit and unreimbursed expenses
If you are on Universal Credit (UC) and incur expenses as part of your job, then make sure you tell your work coach or case manager about them, as they could reduce your earned income for UC purposes, meaning a higher award.
The Universal Credit Regulations allow unreimbursed employment expenses to be deducted from income for UC purposes. For those that have a technical interest in the rules, the main Regulation of relevance is 55(3):
Employed earnings 55. – (3) In the calculation of employed earnings the following are to be disregarded – (a) expenses that are allowed to be deducted under Chapter 2 of Part 5 of ITEPA; and (b) expenses arising from participation as a service user (see regulation 53(2)).
The ability to deduct unreimbursed employment expenses from income is confirmed in the Decision Makers guide at H3140 onwards.
Expenses permitted to be deducted from income for UC purposes, follow the rules for tax purposes and therefore include expenses ‘wholly, exclusively and necessarily’ incurred for the job, professional fees and subscriptions paid to an organisation approved by HMRC and travel and subsistence expenses.
It is worth noting, that the rules for employee expenses for tax purposes are extremely tightly drawn. Basically, the expenditure must have been necessary – you could not have done your job without incurring the expense.
The travel expense rules are also complex. Strictly, the law says travel expenses are only deductible for tax purposes if:
- You have to make the journeys in the performance of the duties of your employment (this may apply where the duties themselves inherently involve travelling such as a delivery driver or meter reader); or
- They are journeys which you make to or from a place you have to attend in the performance of your duties (which can include trips from your office or other work location to visit a customer or other workplace). This rule can also include travel directly from your home to visit a customer or to another workplace (unless the journey is practically the same as the journey from your home to your normal place of work, for example, because the customer lives near your office).
You can find out more about employee expenses on our website.
For example, if an employee has earnings from their job of £975 in their UC monthly assessment period and (say) they incur £100 of deductible travelling expenses, they should have their earned income assessed as £875 instead of £975. This could mean a higher UC award.
However, claimants should be aware that DWP normally use earnings information received by HMRC from employers (called real time information) to set awards of UC, which will not take account of unreimbursed expenses amounts. Claimants will therefore need to tell their UC work coach or case manager about them so that revised earnings amounts can be used.
We are interested in hearing about people’s experiences of asking for deductions for unreimbursed expenses in UC. Should you find yourself being given incorrect information about the availability of an unreimbursed expenses deduction, or have difficulty overriding the RTI data from HMRC please do share your experience with us.