The main areas for tax relief are known to many but if you are just starting out or you do your own accounts then you could easily miss out. Here are six areas where you should be claiming tax relief if you qualify – some of these can amount to huge savings for individuals.
1) Business mileage or fuel
MILEAGE: You could get tax relief when you use your own vehicle for business, or on fuel you buy when using a company car. You can also trace this back several years to claim relief if a self-assessment has not been completed previously.
A point that always needs clarification is what counts as business mileage. Business mileage is the distance travelled doing your job and can include travel to a temporary work place. It DOES NOT INCLUDE normal travel between home and your permanent place of work or private travel.
To work out tax relief for business mileage in your own vehicle follow this calculation for ‘mileage allowance relief’-
Add up your business miles travelled in the tax year and times them by the approved mileage rate.
Then add up any mileage allowance payments received from your employer. Compare your payments received with the approved amount.
If the approved amount is more then you are entitled to Mileage Allowance Relief on the difference. You are also entitled to this relief if your employer pays you no mileage allowance or less than the approved amount.
To qualify for this relief you must keep records of dates, mileage and details of all work journeys.
FUEL: Fuel used for business travel is eligible for tax relief. Again, this is less any payments repaid by your employer. Records of business mileage done need to be kept so the right relief can be calculated.
2) Professional fees and subscriptions
There are certain fees incurred for having your name placed on professional registers or taking out a yearly membership to an organisation. If these registration fees or membership subscriptions are necessary for your work you could be eligible for tax relief. There are two conditions. The first is that you have to be able to prove that they are necessary to your work and the second is that the organisation is on the list of HMRC approved organisations.
For a list of those organisations go to: http://www.hmrc.gov.uk/list3/index.htm
You are not entitled to this relief on life membership subscriptions or any professional fees and subscriptions that you have not paid for yourself.
3) Specialist tools or clothing
If you personally spend money on any tools or specialist clothing in order for you to do your job you may be eligible for tax relief. You can also go back several years to claim this relief if a Self- Assessment return has not been previously completed.
There are exceptions that include overalls, gloves, boots and helmets that have to be worn so are considered part of the job for certain industries. However, if you must pay for the cost of repairing, cleaning or replacing this type of specialist clothing yourself and your employer doesn’t reimburse you, then you are entitled to tax relief.
You are also entitled to tax relief if you have to buy – out of your own money – the tools you need to be able to do your work. The tax relief also applies to the cost of maintaining and replacing the tools.
You will either be entitled to:
- tax relief for the actual amounts you spend
- a ‘flat rate deduction’
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. See the full list of flat rate deductions here Flat rate expense deductions.
If your industry is not listed on the table, you can still claim a standard amount of £60 for the laundry costs of uniforms or protective clothing.
4) Capital expenditure
You may be able to reduce your tax bill by deducting capital allowances on equipment or assets that you must use in doing your job, but which your employer does not provide. You can go back several years to claim this relief that was brought in to cover the loss of value to equipment/assets due to wear and tear or general depreciation. Exceptions include cars, vans, motorcycles and bikes.
How you claim for capital allowances is a little complex so I defer you to HMRC’s comprehensive list on the different ways you can make your claim:
- 100 per cent first year allowances – for investments in green technologies.
- Annual Investment Allowance (AIA) -you can claim AIA on any purchase of equipment (but not motor vehicles) made on or after 6 April 2010 up to an annual amount of £25,000. If the total expenditure is £25,000 or less, you can claim 100 per cent of that whole amount as your AIA.
- Writing down allowances – you claim these on the cost of assets you’ve bought during the year for which you haven’t claimed first year allowances. Add to this the value you’ve carried forward from last year of assets that you have claimed first year allowances on. This total amount is called a ‘pool’ – you can claim 20 per cent of this amount for 2011 to 12 and 18 per cent from 2012 to 13. The pool’s value is reduced by the appropriate percentage rate – but you can add the value of new assets you buy. Find out more about writing down allowances and rates by following the writing down allowance link below.
- Small pools allowance – you can write off the whole balance in a pool where the pool’s value is not more than £1,000.
You can use either first year allowances or writing down allowances – or both.
5) Household expenses when working from home
If you are employed to specifically work from home and have no alternative options then you may be eligible for tax relief on some of your household expenses. Again, you can go back several years for this if a Self-Assessment hasn’t been previously submitted.
Extra expenses typically include the cost of gas and electricity bills for heat and light used during hours of work. The standard expenses of running a home like mortgage, council tax, line rental, and broadband are not included because they are not specific to business use and would be paid as part of the cost of living anyway.
From 6 April 2012, for payments up to £4 per week (or £18 per month if you’re paid monthly) you don’t need to provide any records of the household expenses you’re claiming relief for. For amounts above £4 (or £18 per month if you’re paid monthly) you will need supporting evidence to show that the amount you are claiming is no more than the additional household expenses you have actually incurred.
6) Travel and subsistence
If your job requires you to travel on business you may be able to get tax relief on your travel expenses. You can go back several years to get the relief. If you’ve got to make journeys for business purposes you can deduct the relating travelling expenses and any subsistence costs you’ve paid from your taxable income.
A work journey includes when:
- 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
They do not include:
- ordinary commuting – when you travel between your home (or anywhere that is not a workplace) and a place which counts as a permanent workplace
- private journeys – which have nothing to do with your job
Travel and subsistence expenses include:
- public transport fares
- hotel accommodation where you have had to stay overnight as a part of a business journey that qualifies for tax relief
- meals you have had to purchase whilst travelling or staying overnight
- congestion charges
- parking fees
- business phone calls, fax or photocopying costs
- business mileage
So make sure you are claiming tax relief on everything you are eligible for it. Don’t forget to go back as many years as you are entitled to if you have forgotten to claim it in the past!