Employees – what to do if you incur expenses in relation to your job
HM Revenue & Customs (HMRC) are encouraging employees, who have to spend their own money on things to do their job, to claim tax relief. You can work out whether or not you are eligible to claim using a guide and a new tool on GOV.UK. If you are eligible to claim, you can generally do so yourself for free, via an online form or by posting HMRC a form P87. Our LITRG website includes guidance on completing form P87 and an example form to help you if you get stuck.
Who can claim tax relief?
You may be able to claim tax relief if you are an employee and you pay for certain things which you need to do your job.
You must be a taxpayer (i.e. earn over the personal allowance – currently £11,850), otherwise you cannot claim tax relief.
In general, if you pay for job-related expenses, but your employer reimburses you in full, you will not be able to claim tax relief. (Up until 6 April 2016 you may have had to submit a tax claim to cancel out a tax charge caused by reimbursed expenses, but this does not apply any more).
If your employer partially reimburses you, you may be able to claim tax relief on the difference.
Which work-related expenses are eligible for tax relief?
Examples of eligible items include:
- cleaning, replacing or repairing your uniform or specialist clothing, for example safety boots (in particular, you may be able to claim a flat rate ‘allowance’ per year for the cost of washing your uniform or specialist clothing at home);
- repairing or replacing small tools, for example an electric drill or scissors;
- professional subscriptions or fees;
- work-related travel and subsistence, although not usually costs associated with ordinary commuting (i.e. getting from home to work and back);
- mileage if you use a private vehicle for work, although again, not usually the mileage from ordinary commuting – note that the online tool asks if you have bought or leased the vehicle with your own money – provided that the vehicle is not a company vehicle (owned or leased by your employer), you should respond yes, since there is no requirement to own the vehicle yourself;
- expenses that you incur if you have to work at home on a regular basis, for example the extra cost of gas and electricity for your work space (this usually only applies if it is written into your contract that your place of work is your home, or if you have to work from home because your employer does not have available office space);
- business telephone calls;
- the cost of equipment that you have to buy to do your work, for example a computer.
There is more information about tax relief for employees on our website, which includes details of what counts as a ‘uniform’ and what counts as work-related travel, including explanation of the rules for site-based employees who travel to temporary workplaces (that are expected to last less than 24 months).
What will I get?
If you make a valid claim for tax relief, you will receive tax relief at the rate of tax that you pay. For example, if you want to claim the standard allowance of £60 for washing your uniform at home and you pay tax at a rate of 20% in that tax year, you will receive tax relief of £12 (20% of £60).
If you make a claim for previous tax years then HMRC will send a tax refund or adjust your tax code.
As you can claim tax relief going back 4 years, a 20% taxpayer could possibly receive a tax refund worth £48 for washing their uniform as well as getting their tax code adjusted for the current and future years. Going forward the relief should be given automatically in your pay packet so you should not need to claim again (although you should make sure you check your PAYE coding notice carefully to ensure that the relief has been ‘coded in’).
You should always check your PAYE coding notice carefully, particularly if you have fluctuating claims for expenses. HMRC may include an estimate of expenses in your tax code based on a previous year’s claim. If the estimate is too high, you may end up having to pay more tax at the end of the tax year.
Are there any time limits?
In order to be eligible, you must make a claim for tax relief within four years of the end of the tax year you are claiming for. For example, claims for tax year 2014/15 must be made to HMRC by 5 April 2019. It is no longer possible to make a claim for tax relief in respect of 2013/14 and earlier tax years.
How do I claim tax relief?
You can check that you are eligible to claim tax relief by using a new ‘Check if You Can Claim’ online tool on GOV.UK. You can then go on to submit your claim online.
In order to submit a claim for tax relief online, you need to have a Personal Tax Account (which you can access using a Government Gateway User ID and password). You can set all this up on GOV.UK. You can find out more about the Personal Tax Account and setting one up on our website.
If you prefer, you can claim tax relief by post by printing off a form P87 from GOV.UK. However, you must still complete this version of the form on screen before you print it off.
At the time of writing, HMRC’s guidance says that you can only use this form if you are claiming either on behalf of someone else or relief for more than five different jobs. However, this is incorrect – while HMRC may prefer people to claim online, there is nothing to stop you claiming by post if you prefer.
There is a guide on how to complete form P87, including an annotated example, on our website.
If you want to complete a paper copy of the form P87 by hand, you should contact HMRC and ask for one to be sent to you.
If your expenses are more than £2,500 in a tax year then you need to complete a tax return to make the claim.
Can I do this myself or should I use an agent?
People use tax agents for a variety of reasons including speed, convenience and accuracy, particularly if the area concerned is very complex. HMRC say that currently around 85 per cent of eligible taxpayers pay agents to claim this type of tax relief on their behalf. However, it is straightforward to make this sort of claim directly to HMRC yourself and HMRC are now taking steps to clarify this. The key advantage is that you then receive the full amount of tax relief you are owed, and do not have to pay a fee to an agent. HMRC have also indicated that if you make the claim online through your Personal Tax Account, you may receive your tax repayment within three weeks, so it can be quick too!
As stated above, HMRC have created a simple Check if You Can Claim tool to make it even easier to make the claim yourself; this is available, along with further HMRC guidance on employee expenses, on GOV.UK. This is intended to help provide reassurance that your claim is valid and will be approved.