With rising costs, the squeeze on people’s finances, whether you are an employee or self-employed, is certainly biting. So now is the time to look at ways you can save money. Tax savings is one area that people could take advantage of, but many are missing a trick.
If you’re working in the UK as an employee or running your own business, understanding tax-free expenses can save you money and keep you on the right side of HMRC. Let’s break down what you can claim without paying tax.
Getting around for work
When it comes to travel for work, HMRC is quite generous.
If you use your own car for business trips (not including your regular commute), you can claim 45p for every mile you drive for the first 10,000 miles and 25p after that.
If you are doing 1,000 miles a year, that equates to £450 tax-free, which is more than the cost of petrol and wear and tear on the vehicle.
Taking the train or bus? Keep those tickets – the cost of public transport for business journeys is tax-free, too.
If your work takes you away from home overnight, you won’t need to pay tax on reasonable costs for hotels and meals. Just remember to keep your receipts and make sure these trips are genuinely for work purposes.
Working from home
With more of us working from home these days, it’s good to know what expenses you can claim.
The simplest option is claiming £6 per week – you don’t need to keep receipts.
If you’re using more electricity, heating, or internet because of working from home, you can claim a portion of these bills instead, though you’ll need to work out exactly how much relates to your work.
Some criteria need to apply, which can be found here.
Learning and development
Good news if you’re looking to improve your work skills. Many training courses are tax-free as if they are relevant to your job.
This includes courses that help you improve what you do or keep your professional knowledge up to date. The same goes for any books or subscriptions you need for work.
Work clothes and equipment
If your job requires specific clothing with a company logo or protective gear, you can claim these costs tax-free. This doesn’t, however, include your regular work clothes, even if you only wear them for work.
You can also claim for the cleaning of these uniforms and replacing them when needed.
Team events and welfare
Want to boost team morale? You can spend up to £150 per person each year on staff parties without anyone paying tax on it. This is a great way to celebrate with your team at Christmas or during the summer.
However, a word of caution. If the amount per person exceeds £150, the whole amount becomes taxable – there is no £150 tax-free element. Check out our more detailed blog about the potential pitfalls of ‘The Christmas Party Tax Trap’
Other tax-free perks can include workplace counselling services and health screenings.
A few things to remember
Always keep your receipts and records, as HMRC may want to see them late.
Make sure anything you claim is genuinely for work – if it’s partly personal, you can only claim the work portion.
People often think they can claim for their daily commute or regular clothes they wear to work – unfortunately, these aren’t tax-free.
Just because you are at the office doesn’t mean you can claim your work lunch if it is your regular place of work.
The legislation is set out in exact terms under Section 336 of the Income Tax (Earnings and Pensions) Act 2003. For employment expenses to be paid tax-free, they must be incurred wholly, exclusively and necessarily in the performance of the duties. There can be no duality of purpose; in other words, there can be no private element in the payments.
Final thoughts
Remember, claiming tax-free expenses isn’t about trying to claim everything possible – it’s about claiming what you’re genuinely entitled to. Keep good records, be honest about your claims, and check the rules if you’re not sure. This way, you can save money while staying on the right side of HMRC.
