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Tax allowances and reliefs for employees and directors
If you're an employee or a director you might be able to get tax relief for business expenses for which you have paid. These include the cost of professional fees or subscriptions, business travel and subsistence, tools and specialist clothing.
What counts as a 'tax-deductible' expense?
You can only get tax relief for business expenses you've paid for and if they were for the cost of:
- travelling you had to do in doing your job
- other expenses you had to pay in doing your job - and which related only to doing your job
You can't ask for tax relief if your employer has already reimbursed you for the expense and has agreed a ‘dispensation’ with HM Revenue & Customs (HMRC).
Key allowances and reliefs
Business mileage or fuel
You may be able to get tax relief for business mileage when you use your own vehicle on business, or for fuel you buy when you use a company car. You can't claim, though, for your normal commuting costs.
Business mileage is mileage you travel doing your job. It can include travel to a temporary work place.
Tax relief for business mileage in your own vehicle
You may be able to get tax relief for business mileage if you use your own vehicle for work. It can be a car, van, motorcycle or cycle.
You are only entitled to Mileage Allowance Relief if your employer pays you:
- no mileage allowance
- less than the approved amount.
If your employer pays you more than the approved amount, you'll have to pay tax on the extra.
Tax relief for fuel when using a company vehicle
If you pay for fuel when using a company vehicle for business travel you can get tax relief on fuel costs, less any payments repaid by your employer and covered by a 'dispensation.
Professional fees and subscriptions
You can ask for tax relief for the cost of fees and subscriptions you pay to some approved organisations - but only if you have to pay them, or if it's helpful for your work.
You may get tax relief on professional fees and subscriptions if:
- you have registered, obtained a licence or become a member of the organisation in question because it's necessary to your work
- HM Revenue & Customs (HMRC) has approved the organisation you're a member of
Tools and specialist clothing
If you have to spend money on tools or specialist clothing for your job you may be entitled to either:
- tax relief for the actual amounts you spend
- a ‘flat rate deduction’
If you have to provide small tools (ex: scissors for an hairdresser) or buy specialist clothing for your work - like a uniform or protective clothing - you may be able to get tax relief for the cost of them.
Flat rate expenses
Flat rate deductions are amounts that HM Revenue & Customs (HMRC) has agreed nationally - or sometimes locally if conditions are very different - with trade unions or other bodies. The deductions cover what's typically spent each year by employees in different trades. For example, someone working in the clothing industry can get a deduction of £60 each year.
The allowances cover items that you have to provide so that you can do your work. They're to recognise that assets or equipment lose value as a result of general wear and tear - or depreciation. (likely to last for at least two years).For example: a desk for your work. There are some exceptions - cars, vans, motorcycles and cycles don't count.
The Annual Investment Allowance (AIA) which allows a 100% tax deduction for expenditure on equipment is currently £250,000.
Household expenses when working at home
You may be able to get relief for some household expenses and some travelling costs if you work from home. You might also be able to get capital allowances for capital expenditure.
The household expenses include:
- the extra cost of gas and electricity to heat and light your work area
- business telephone calls
Travel and subsistence costs
You may be able to get relief for the cost of business travel - for example if you need to visit a client or go to a temporary workplace. You can also ask for relief for 'subsistence' - the cost of meals and overnight expenses.
What are business journeys?
These are when, as part of your job:
- you have to travel from one workplace to another - this includes travelling between your main 'permanent workplace' and a temporary workplace
- you've got to travel to or from a certain workplace because your job requires you to.
Travel expenses that qualify for relief
You can get tax relief on the necessary costs of business travel like public transport fares, hotel accommodation, meals, tolls, congestion charges, parking fees, business phone calls, fax or photocopying costs.
You might have to use your own car, van, motorbike or cycle to make business journeys. Your employer can give you mileage allowance payments to cover your costs - up to a certain maximum amount per mile - and you don't have to pay tax on them. If your employer doesn't pay you the maximum, you are entitled to tax relief on the difference between:
- what your employer actually pays you for your business journeys
- the maximum tax free amount that your employer could have paid you for those journeys
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