How to claim tax relief by LITRG
1) Check what types of work expenses you can claim tax relief on
You can only claim for things to do with your work. The rules are quite strict so if you buy something that you use for work but also use privately then this won’t be allowed,unless the work part and the private part can be separated out and a work proportion can be identified.
Examples of expenses that you can claim tax relief include:
- cleaning, replacing, or repairing your uniform or specialist clothing, for example safety boots. In particular, you may be able to claim a flat rate ‘allowance’ per year for the cost of washing your uniform or specialist clothing at home;
- repairing or replacing small tools, for example an electric drill or scissors;
- professional subscriptions or fees;
- work-related travel and subsistence, although not usually expenses associated with ordinary commuting. Ordinary commuting means getting from home to work and back and is only claimable by itinerant workers or those travelling to a temporary workplace;
- mileage if you use a private vehicle for work, although again, not usually the mileage from ordinary commuting;
- additional expenses that you incur if you work at home, for example the extra cost of gas and electricity for your workspace. This usually only applies if you are‘required’ to work from homebut see the note below about coronavirus;
- business telephone calls – contrary to popular belief, these can be claimed in addition to working from home tax relief as confirmedby HMRC.
There is more information about tax relief foremployees in our guidance, which includes details of what counts as a ‘uniform’, work-related travel, and a detailed explanation of when you can claim for home to work travel.
Be careful with working from homeexpenses, as the situation isquite tricky.In 2020/21 and 2021/22 duringthe coronavirus pandemic, the governmenteasedthe usual strict rules. Under the relaxation, people who had to work from home(and met the strict requirements) for only part of the tax year could claim tax relief on £6 a week for the full tax year. This easem*nt remains in place for 2022/23, but ends with effect from 6 April 2023.
The government also introduced new rules, which mean that when employees have to work at home during pandemic outbreaks based on government advice, such as a national lockdown, they will be able to claim tax relief on expenses of working from home.
In 2022/23, it is important to note that althoughthese ‘easem*nts’ remain in place, thelifting of coronavirus restrictions meansfewer people are likely to be eligible to claim. If you are now working from home more regularly but this is your choice instead of being required by your employer, you won’t be able to claim the tax relief from 6 April 2022.
2) Write down all the expenses that could count going back four years
You have four years from the end of the tax year in which you paid the expense to claim tax relief.
As we are in the 2022/23 tax year, this means you can make a claim going back to 6 April 2018 (the 2018/2019 tax year). If a claim is not made within the time limit you will probably lose out on any refund that may be due as the tax year becomes 'closed' to claims. We cover a rare exceptionin our guidance.
Write down all your expenses in each employment that you have had over the time period in question.Find any receipts (if available) or bank statements (if not) to prove the spending, in case HMRC ask to see your records. You will not need these where there are ‘flat rate’ amounts available to claim as opposed to actual expenses, for instance the £6 a week for homeworking expenses.
Be aware that HMRC usually process tax refund claims on a ‘pay now, check later’ basis. This means that they may pay out a refund when they receive your claim even if you are not entitled to it.However, they have the right to check the validity and accuracy of the claim and the amount of the refund at a later stage – and may ask for the money back if the claim turns out to be incorrect.
3) Double check you are definitely eligible to claim tax relief
The tax relief works by taking off the amount of the expense from your employment income. This reduces your taxable income. This is why they are sometimes called ‘tax deductible’ or ‘allowable’ expenses.
As you will have paid taxes on your employment income during the tax year underPay As You Earn (PAYE), you can get a refund of tax, as your final tax bill will now be less. If you are not a taxpayer, because you do not earn more than the personal allowance (£12,570 in 2022/23), then unfortunately you cannot get any tax relief. This is because you have not paid any tax. You can find previous years’ personal allowances in our guidance.
Also, if your employer pays for or reimburses your employment expenses, you cannot get tax relief because you have not personally incurred any expense. If your employer partially reimburses you, you may be able to claim tax relief on the difference.
4) Work out how much tax relief you are dueand how you will get it
If you make a valid claim for tax relief, you will not receive the full amount of the expense back from HMRC – you will just receive tax relief on the amount at the rate of tax that you pay. For example, if you want to claim the standard allowance of £60 for washing your uniform at home and you pay tax at a rate of 20% in that tax year, you will receive tax relief of £12 (20% of £60). As you can claim tax relief going back four tax years, a 20% taxpayer could possibly receive a tax refund cheque worth £48 (£12 per tax year) for washing their uniform as well as getting their tax code adjusted for the current and future years.
If you are using a tax refund company (see step 6 below) this ‘Work out how much tax relief you are due’ stage is very important, as we are aware that some companies exaggerate the amounts you can claim. For example, some companies say you can claim £312 (£6 per week x 52) if you worked from home for just one day during the coronavirus pandemic – however, that is not correct. You will only gettax reliefon £312. If you pay tax at a rate of 20% in that tax year, you will receive tax relief of £62.40 not £312. If you know the maximum refund you are due for working from home is £62.40 over a couple of years, but the company promises to be able to get you back £1,000s, then alarm bells should ring.
If your tax code is adjusted for your expenses, you should receive tax relief automatically in your pay packet so you should not need to claim again (although you should make sureyoucheck your PAYE coding notice carefully to ensure that the correct tax relief has been ‘coded in’).
On the other hand, you should regularly check your PAYE code to make sure any expenses that have previously been coded in are still correct.For example, if you have claimed homeworking expense relief in 2020/21 and 2021/22, you should check your PAYE tax codes and contact HMRC to get the relief removed if you are no longer eligible in 2022/23.
5) Decide how you wish to claim the relief (for example, online or on paper)
⚠️This step should be read with step number 7.
To get tax relief, you have to make a claim to HMRC, but it is not difficult to do so. If you do not usually have to complete a tax return, you can make a claim on form P87. There are two versions available from GOV.UK:
- An online version through theGovernment Gateway
- A P87 form that youcomplete on screen, print off and post to HMRC.
You will need your employer’s details, including their name, type of business, address, and employer reference number (for example 123/AB456- you will find this on your payslip or P60). If you do not have the ‘employer industry’ or your ‘employee number’ for the print and post form P87, you should insert ‘N/A’ or ‘unknown’.
The post and print form P87 has space for five different tax years or five different employments. You cannot combine expenses from different employments during a particular tax year into one total.So, if you want to claim tax relief for the current year and the past four tax years and had the same job throughout, you will be able to fit it all in on one form. If you have expenses that you want to claim for two different jobs over the past two tax years then you will be able to fit it all in on one form. If you have expenses that you want to claim for two different jobs but going back for all four tax years, then there is not enough space on one form and you will need to complete more than one.
Employees can also use HMRC’sonline service for claiming tax relief for working from home. This microservice was introduced during the coronavirus pandemic to help speed up the claims process in simple cases (for example, where you only want the £6 per week flat rate relief put into your tax code). It remains in place for 2022/23 but for the reasons explained above, we expect far fewer people will be using it.
6) If you want to use a tax refund company – understand the risks
There are plenty ofcompanies who offer to make tax relief claims for you, but they'll take a fee from any repayment you get and can sometimes cause people other problems.
Tax refund companiescan provide a useful service for those who choose to pay someone to deal with their refund claim. We know that some companies make accurate claims with transparent fees and processes.
However, others are less scrupulous. You need to be careful about online enquiry and application forms which ask you to sign something online or tick a box to accept terms and conditions. Some tax refund companies use the completion of their online form or tick-boxes to create a legal ‘deed of assignment’. This assigns all your tax refunds for a particular period (not just the one that you are using them for) to the tax refund company! A legal assignment cannot be changed or revoked by you alone. This means that other refunds, which are often larger and more valuable that the original refund applied for, can get sent to the tax refund company. They then deduct their fee on them, even though they haven’t done any work towards them.
Pleasebe aware that social media adverts about getting tax relief may be from commercial tax refund companies and not HMRC.
Sometimes simply using a calculator, expressing an interest, or entering your email address seems to be enough to sign you up to a tax refund company’s services and trigger the ‘assignment’ issue mentioned above.
7) Wait for your refund to arrive!
HMRCwill issue your tax refund by cheque and/or adjust your PAYE tax code once they have processed your claim. Please note, even if you complete and submit your claim online, HMRC will still issue your refund by cheque rather than make a BACS transfer.
If you submit your claim online, this is likely to take less time to process than if you send in a postal form – in general, at the moment, postal forms can take quite a long time for HMRC to receive and process.
The good news is thatHMRC’s P87 form has recently been redesigned. The new design allows HMRC to start automating the process, by scanning the form and identifying the necessary information. This will help them to process claims more quickly.
You can make sure that there are no unnecessary delays to HMRC processing your claim, by reading the instructions, completing the form carefully and submitting exactly what HMRC needs first time. This should help to avoid any requests for further information or queries from HMRC. If you are posting the form into HMRC, you can find some hints and tips to help ensure everything goes smoothlyhere.
