Tax Tip 4: Claiming expenses as an employee

If you are employed and/or a director there are a number of expenses which can be deducted against your income or against the income of your company before tax is charged.

Employees can claim for the costs of travelling to a place they have to attend in order to fulfill their work obligations as long as they are not commuting to their permanent work place. The costs of accommodation and meals while away on business are allowable. Site based employees with no permanent work place can claim for the costs of going to and from their site as long as the job is expected to last less than 2 years.

Employees using their own car or van can claim 45p a mile tax free for the first 10,000 business miles in a tax year and then each additional mile at 25p. Motor cyclists can claim 24p a mile and cyclists can claim 20p a mile.

Employees can claim expenses for tools and special clothing for special occupations, but the costs of normal clothing are not allowed even if they wouldn’t be worn outside of work.

Employers can pay expenses to employees who have to work from home. these are exempt as long as they are reasonable, this can include a proportion of the costs of light, heat, telephone calls but not council tax, or mortgage costs. Certain capital allowances for purchasing items such as office equipment may also be allowed. Employees that have a home working agreement with their employer can be paid up to £4 a week expenses tax free without having to provide supporting evidence.

Other allowable expenses for employers include

  • Pension scheme contributions.
  • Directors liability or professional indemnity insurance.
  • Professional subscriptions to approved organisations.
  • Provision of parking at your place of work.
  • An annual health screen or medical checkup.
  • The provision of eye care tests and/or glasses for employees that use computers.
  • Provision and administration costs of child care vouchers (up to £243 per month per employee and they have to be available to all employees)
  • Provision of a mobile phone.
  • Annual staff parties or functions up to a value of £150 per employee including VAT
  • Charitable donations under payroll schemes.
  • Cycles and related equipment if used mostly for work and available to all employees.

Business entertaining of clients is not tax deductible.

Employers may be required to pay Class 1A NIC on certain benefits even if the employee claims the same amount as a tax deductible expense, the employer should seek a dispensation from HMRC to make sure these items can be excluded as benefits from an employee’s P11D return.

This list is a guide and starting point to help you identify allowable expenses, but because this is a complex area it is not exhaustive. If you would like further information please seek more guidance from your accountant or HMRC on what you can claim.

 

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