Tax Reliefs and Expenses

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April 14th 2021
Tax Week 2
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Tax Reliefs and Expenses

Learn how tax reliefs and expenses can be used to reduce your tax bill.

Types of expenses you can claim tax relief on

Remaining expenses are broken up into categories, and this is done depending upon the type of taxpayer you are. So, we will break this into ‘employed’ and ‘self employed’.

Expenses for employed people (including directors)

If you have spent money at work, or for work, on something related to getting your job done, there is a possibility you can reduce the amount of tax you have to pay. In most circumstances, it is the equivalent of having your gross income reduced by the expenditure amount for tax calculation purposes. The expenditure has to be related to work, or apportioned, and any amounts refunded to you by your employer must be deducted.

Guidance by HMRC indicates the following as possible categories which they would consider providing tax relief.

  • Business Mileage (or private fuel purchased a company car for business)
  • Small tools and work related clothing (and maintenance)
  • Work related expenditure when working from home
  • Travel costs and any subsistence or overnight stay costs
  • Fees and subscriptions of membership to professional groups/bodies

You can read more about the types of expenses an employee can claim tax relief upon here.

Expenses for self employed people

If you are self employed, any expenditure as part of your business can be deducted from your turnover. Any expenditure for which you have had private usage must be split, with only the part spent on business being used for claiming relief.

HMRC guidance indicates the following as possible categories of allowable expenditure:-

  • Employee costs (before tax)
  • Raw Materials or Stock
  • Manufacturing costs and cost of materials
  • Advertising, Marketing expenditure
  • Travel and Motoring
  • Legal, Accountancy etc.
  • Much more …

The list above is just a brief overview, you can read more about the types of expenses an self employed people can claim against profits here.

There is another category of expenditure, and this relates to both employees and the self employed. Depending upon the lifetime expectancy of an item purchased (and any value expected to be retained), categorising certain expenditure can be tricky.

Continue to the next page to learn about capital allowances.

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