Mid August Newton & Co Blog from John Robson Cima MIP
Quote of the day
A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.
Self-assessment: what you can and cannot claim for
We spell out things you can legitimately claim for, and those you can’t – whether you are an employee or self-employed
You can claim for clothes if they are specialist items used only for work.
If you’re employed …
… or receive a company pension, and pay tax through the PAYE system, you can claim:
If you are a higher-rate taxpayer and have made gift-aided charitable donations, you can claim back the higher rate tax you have paid. For example, if you donated £100 to your favourite charity, the total value of your donation to the charity was £125, so you can claim back £25 if you pay tax at 40% (£125 × 20%).
Professional fees and subscriptions
If, in order to do your job properly, you have to pay annual registration fees or membership subscriptions to a professional body, you should be able to offset them against tax. Trade union fees don’t always count, however, so check the HMRC list of approved memberships at hmrc.gov.uk/list3/index.htm
Uniforms, protective clothing As a general rule, you can’t get tax relief for the cost of clothing you wear to work – but there are some exceptions. For example, if you work in a sector such as the building trade, you’ll have to wear protective clothing such as overalls, gloves and boots. If you have to pay for the cost of repairing, cleaning or replacing this type of clothing yourself and your employer doesn’t reimburse you, you are entitled to tax relief – but you can’t claim for the initial cost of buying the items.
You can also get tax relief on the cost of repairing, cleaning or replacing a uniform if it’s “recognisable”, your employer requires you to wear it while you’re working, and you’ve got to pay for it yourself.
Working from home
If you are employed specifically to work at home, “and have no alternative but to do so”, you may be able to get tax relief on some of your household expenses, such as the extra cost of gas and electricity and business phone calls, says HMRC.
But you won’t be able to get relief on domestic expenses that you’re paying anyway, such as your mortgage or council tax, or expenses that relate to both business and private use, such as your phone line rental or internet access.
If you’re self- employed …
… or partially self-employed, you enjoy much greater scope for tax offsetting, says Mike Warburton, tax guru at the accountants Grant Thornton.
If you use your home to conduct your work and your office accounts for, say, 20% of your household space, you can claim that same proportion of household bills, such as gas, electricity, water and council tax against your tax liability.
If you only use your home in a minimal way to conduct your business, such as writing up your business records, HMRC will now accept a £4 per week – or £208 a year – office deduction without quibbling
Internet and phone/IT
You can claim the cost of any business calls. In terms of line rental and broadband connection fees, a proportion of the cost can be claimed based on business use compared to total use.
If you buy a new computer or iPad, you may offset its proportional cost, so if it’s entirely used by the business, you may offset the whole cost. The same is true of software. You can claim for printers, stationery and trade journals.
Car and van insurance, repairs, servicing, fuel, parking, hire charges, vehicle licence fees, AA/RAC membership used as part of the employment, can all be offset against tax. However, you can’t claim for private motoring, or for speeding tickets.
HMRC allows all costs incurred for advertising in newspapers, directories, mailshots, free samples, and the cost of designing and running a website to be offset. The same is true of employing accountants, solicitors, surveyors, or architects, as well as paying any professional indemnity insurance premiums.
Bank and other charges
Bank, overdraft and credit card charges, hire purchase interest and leasing payments incurred as part of the business, are all tax deductible.
You can’t claim is for clothes unless they are specialist items that are entirely used for work. A self-employed accountant could not claim for a new suit arguing he had to wear it as part of his work. However, if he also had tree surgery business, he could offset the full cost of steel toe-capped boots and a protective jacket, as well as the costs of running the chainsaw.
Taking clients out for lunch is now generally never tax deductible, even if they are clients and you are talking about work. The same is true of taking suppliers to sporting events or similar.
If you need any clarification of any points raised in the above, then please give me a call or send me an email.
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