Allowable Expenses for UK Employees

Allowable Expenses for UK Employees

Typically, employers are responsible for the bulk of the expenses incurred by their employees. Typical costs include the allocation of office space and the provision of stationery and other office supplies, a work phone, and a computer.

However, there are some costs where employees bear their expenses, such as lunch, commuting, and business attire expenses. Except in extreme and extraordinary cases, these expenses are not deductible from taxable employment income.

If the costs are not immediately borne by the employer, then they are required to refund the expenses later. However, if an employee pays for a job-related expense using their own money and is not refunded for it by the employer, they may be eligible for tax relief.

For an employee to become eligible for tax relief, the basic requirement is that the expenses should be borne entirely, solely, and inevitably in the fulfilment of work-related duties.
A lot of information to get your head around right? That’s why we’ve written this guide around allowable expenses for UK employees. Let’s dig deeper into the type of allowable expenses that qualify for tax relief and how you can claim it. Read on to find out.

What Employment Expenses Qualify for Tax Relief in the UK?

The laws for claiming expenses incurred at work are very rigid. The basic rule is that these expenses must be ‘fully, solely, and inevitably’ incurred in the fulfilment of your duties. In other words, incurring these expenses is unavoidable when performing your work duties, and anyone who performs your job will have to bear them.
The following six expenses are employment expenses for which you can claim a tax relief in the UK:

  1. Work-Related Travel
  2. Clothing
  3. Accommodation and Subsistence
  4. Professional Subscriptions
  5. Mileage Allowance
  6. Working From Home

1. Work-Related Travel

Besides ordinary commuting, you can claim tax relief on all essential travel expenses. Ordinary commuting includes the travel to and from your home and the commute to any other place not related to your work. For example, if an employee is assigned to a different location from their permanent workplace on one of the five workdays, the commute to and from the location will be tax-deductible.

2. Clothing

Generally, the cost of work-wear is not deductible from taxable earnings. Business attire is included in this, even if it is only worn in the workplace. The only exceptions are uniforms and clothing needed for safety and health purposes, which are tax-deductible.

3. Accommodation and Subsistence

Accommodation and upkeep are tax-deductible when an employee is away from home on work trips. Other incidental expenses incurred as a result of being away from the workplace overnight also qualify as taxable income up to a cap of £5 within the United Kingdom and £10 per night for travels outside the UK, if the expense is repaid by the employer.

If a refund exceeds the limits, the full cost of the refund will be taxable.

5. Mileage Allowance

Due to heavy taxation on most corporate vehicles for both workers and employers, the use of a privately owned car for work travel is increasingly common amongst employees. Up to fuel allowance, the cost of utilizing a private car can is deductible from taxable earnings.

Any payment that the employer spends above the allowance is taxable. If the company spends less than the allowance, this deficit is tax-deductible.

6. Working from Home

Working from home is extremely relevant these days following the COVID-19 pandemic, which initially forced employees to work from their own homes during lockdowns and social distancing protocols.

For a lot of people in the country, working from home has become the norm since the outbreak of the pandemic. Many of them are now asking what, if any, compensation can they get for incurring additional work-related costs due to their new arrangements. The place to start is the existing work for home rules that have been in place for some time now.

A deduction from tax may be made if an employee is working from home. There is no obligation that a claim of up to £4 per week is substantiated. In pursuit of deductible expenses of more than £4 a week, or £18 a month, it is important to maintain the relevant records. Remember, you are only allowed to deduct the additional expense of working from home.

Final Word

If you are forced to work at home due and your employer does not refund the allowable expenses, you can claim a tax relief. You can claim deductions for the other work-related expenses detailed above by completing and submitting a HMRC form P87.

We hope you found this allowable expenses for UK employees guide helpful. For more information about how to claim your tax relief, contact us today at Q Accountants, or alternatively book a discovery call

Allowable Expenses For UK Employees FAQs

  1. What are allowable expenses in the UK?

    Allowable expenses in the UK refer to expenses that can be deducted from an individual or business’s taxable income. These expenses are considered necessary for running the business and can include things like office rent, employee wages, utilities, marketing costs, and travel expenses.However, it is important to consult with a tax professional or refer to HM Revenue and Customs guidelines to ensure that expenses are indeed allowable and comply with tax regulations.

  2. Which employee expenses can I claim?

    The employee expenses that you can claim depend on your specific job and the laws and regulations of your country. However, some common employee expenses that can be claimed include travel expenses (such as transportation and accommodation), business meals and entertainment, home office expenses, professional development and training expenses, and certain equipment and technology expenses.It is important to consult with a tax professional or refer to your local tax laws to determine which expenses you are eligible to claim.

  3. Are staff costs allowable expenses?

    Yes, staff costs are generally considered allowable expenses for most businesses. These costs include salaries, wages, bonuses, benefits, and any other compensation for employees. However, it is essential to consult with a qualified accountant or tax advisor to ensure compliance with specific regulations and guidelines set by tax authorities.

  4. What are examples of allowable expenses?

    Examples of allowable expenses include office rent, employee salaries, travel expenses for business meetings, purchasing necessary equipment or software, marketing and advertising costs, legal and accounting fees, and insurance premiums.