Generally, you can claim tax relief on work-related expenses. If an expense relates partly to work and partly to personal use, then you can only receive tax relief on the work-related part. You cannot claim tax relief on expenses if you have been reimbursed by your employer, unless they have deducted tax.
How to claim tax relief for your job expenses
As a rule of thumb, if you are an employee, your employer must ensure that you have everything you need to perform your job. This means they either provide it to you directly or reimburse you for any necessary purchases you make.
There is a huge range of potentially tax-deductible expenses. The key to figuring out what expenses are tax-deductible is to think about whether they are specific to your job. For example, a regular commuter season ticket is unlikely to be tax-deductible because it is not directly linked to your job. A ticket to get you to a client meeting, however, is likely to be a tax-deductible expense. In such case, your employer should reimburse you for the full amount. If they deduct tax at the source, then you can apply to HMRC to have it reimbursed.
If you are not required to self-assess and your employer owes you less than £2,500, then you can recoup your tax through PAYE. With this approach, you don’t actually get a direct refund. Instead, you pay less tax over the year. If you are owed more than £2,500 then you need to apply for your refund via self-assessment. Likewise, if you have to self-assess anyway, that’s how you should claim your refund no matter how much you’re owed.
Regardless of how you make your claim, you must do so within four years of the end of the tax year in which you made the purchase. You must also keep records of what you’ve spent. Ideally, you should keep all receipts, albeit not necessarily on paper.
How to claim tax relief for your self-employed expenses
As a self-employed person, you are responsible for purchasing whatever you need for your business. In principle, any purchases that are clearly necessary for your business will be tax-deductible expenses. In practice, there can be some nuance.
If you complete your accounts yourself, it’s advisable to get a copy of HMRC's helpsheet HS222. This gives a lot of helpful guidance on how to calculate your taxable profits. In particular, it includes a table to help you work out what expenses are tax-deductible (and what are not).
If you’re self-employed then you will definitely be self-assessing. You must report your tax-deductible expenses via your self-assessment. If you are a small business you can use cash-basis accounting. Alternatively, you can choose to use traditional (accruals) accounting. Larger businesses must use traditional accounting.
The accounting method you use will determine your exact approach to claiming back business expenses. For example, in cash-basis accounting, you will typically report all tax-deductible expenses in your self-assessment for that year. In traditional accounting, by contrast, you may spread them over more than one year.
If your turnover is less than £85,000 then you can submit your expenses as a total figure. If your turnover is above this, then you must break them out. In either case, it is strongly advisable to keep records of your purchases. Ideally, you will keep all receipts – they can be on paper or in digital form.
If possible, you should avoid paying with cash and get a receipt for every purchase. For some businesses, however, this will simply not be practical. In these cases, you should keep the best records you can.
If you make contactless payments and don’t get a receipt, keep the card statement and record the specific details of the purchase. If you must use cash and can’t get a receipt, record the specific details of any low-value purchase and every possible detail of any high-value purchase.
You do not, however, usually have to keep these records in paper form. You do, however, need to make sure that any photos/scans you take are clear enough to be legible.
How we can help
If you’re interested in discovering more about how to claim tax relief for your job expenses, then get in touch with our financial experts. Find out how GoCardless can help you with ad hoc payments or recurring payments.