What is Tax Relief? 

Tax relief is made available by HMRC so you can reduce the amount of tax you pay.

The government makes tax relief available to both employed and self employed individuals to help cover the cost of a variety of different types of living costs.

Claiming tax relief can mean you pay less tax or be due a tax rebate on tax already paid.

To receive the tax relief you are entitled to you will typically have to claim it but some tax relief is applied by HMRC automatically.

Understanding what type of taxpayer relief you can apply for is important so you can take advantage of as many income tax saving reliefs as you can.

The way you claim tax relief is dependent on the kind of relief you are claiming for and the specific claims process HMRC has in place.

Our guide to tax relief will highlight a number of the most common taxpayer reliefs and let you know how to claim your tax relief back directly from HMRC.

What tax relief can I claim for?

The type of tax relief you could be entitled to will depend on your own set of circumstances.

Employed taxpayers can claim income tax relief on a number of what HMRC calls expenses of employment.

Claiming tax relief for job expenses is a straightforward way to pay less income tax and get some financial help towards the cost of your work related costs.

You can backdate a claim for expenses for the previous four tax years which usually results in a tax rebate if you are claiming for past years.

If you’re employed under PAYE some of the popular ways you can secure tax relief against your income tax are:

Mileage tax relief

Mileage and travel tax relief is possible for taxpayers who travel to temporary workplaces but not for normal commuting to one place of work.

HMRC gives you a rate of 45p per mile for the first 10,000 business miles and .25p thereafter.

• Using your own car or van: Claims can be made if you use your own car for work, but only if you go to temporary places of work.
• Company car: If you pay for your own fuel in a company car or van and are not reimbursed by your employer for business miles.
• Public transport: You can also claim for the cost of public transport if you use it to travel to temporary workplaces.

You can use our business mileage tax rebate guide to find out more about mileage claims and what it could be worth to you.

Professional fees tax relief

Tax can be claimed back on subscriptions or fees paid into some professional bodies and trade unions.

Tax relief cannot be claimed on all professional bodies and trade unions, only the ones approved by the tax office.

Even if the organisation you pay membership into is approved, you can only claim if you need the membership or it is helpful for your job.

You can view the a list of most of the allowable professional bodies in our professional fees directory.

Tools tax relief

Buying tools and equipment for your job allows for a claim to be made on the expenses you’ve incurred.

There are normally two ways of claiming tax back for your tools:

• Tax code allowance. Many industries have agreed an allowance to be used in your tax  code. This type of claim does not need receipts and the value of the allowance varies from industry to industry.
• Capital allowances. Allows for tax relief on the full cost of your tools, and you will need receipts or a statement showing proof of purchase. Usually you can claim a considerably higher tax rebate this way, in comparison to the agreed tax code allowances.

Uniform tax relief

If you wear a uniform or protective clothing for work you can claim uniform tax relief to cover the cost of washing and maintenance.

The amount you can claim is currently worth £60 per tax year and is known as a flat rate expense.

Flat rate expenses tax relief

The tax office has agreed a tax code allowance, called a flat rate expense, for many different job titles and industries.

It is usually given to cover the cost of uniform washing and, in some cases, purchasing tools.

The amount of flat rate expense that can be claimed varies depending on your job title and you don’t need to provide receipts showing the costs you have incurred.

You can find out how much flat rate expenses tax relief you can claim for in our flat rate expenses guide.

Working from home tax relief

It’s possible to reclaim a tax rebate if you use your own home for work purposes and meet the eligibilty criteria set out by HMRC.

You can claim tax relief on the cost of household expenses like:

• Telephone calls.
• Gas and electricity.

You can’t claim for your mortgage or rent.

HMRC has agreed a flat rate meaning you don’t need to provide receipts.

The working at home agreed rate after the 5th April 2020 is set at £6 per week.

If you want to claim for more than the agreed rates, you’ll need to provide evidence.

How do I claim work expenses tax relief?

The method used to claim your tax relief for work expenses back from HMRC depends on the type of tax relief, the value of your claim and whether you already complete a self assessment tax return.

Tax relief claims valued at under £2500

To claim tax relief for expenses due to your job you will need form P87 if you don’t already complete a self assessment tax return.

The P87 is available to submit online or you can complete it online and post it to HMRC if you would prefer.

If you already complete a self assessment tax return in the year of your claim you should include the expenses in your tax return and ignore the P87.

Tax relief claims valued at £2500 or more

HMRC requires a self assessment tax return to be submitted if your tax relief claim is worth £2500 or more.

A tax return needs to be requested usually through completing HMRC form SA1 which when processed allows for a tax return to be submitted online or in paper format.

Marriage allowance tax relief

The provision of marriage allowance is applicable for couples (who are married or in a civil partnership) where one or both members were born after April 5 1935.

Claiming the marriage allowance permits a partner whose earnings are less than the personal allowance of to transfer a tenth of their allowance to their partner provided they are subject to basic rate tax.

The spouse with higher income is granted a tax credit effectively giving them tax relief against  taxable income.

HMRC would prefer that you apply for the marriage tax allowance online if you don’t already complete a self assessment tax return.

Tax relief and your P800 tax calculation

When your tax relief claim has been processed through PAYE HMRC will send you out a P800 tax calculation in the post to give you a breakdown of what you are owed back.

When you receive a P800 tax calculation you can claim back your tax rebate online via your personal tax account or by using the HMRC tax rebate app which let’s you request your rebate to be paid by bank transfer.

Tax relief and your tax code

HMRC uses a tax code to tell your employer or pension provider how much tax to deduct from your pay.

Following a successful claim for tax relief HMRC will often give you more tax free personal allowance which in turn means a higher tax code.

The higher tax code will be sent to your employer so they can deduct less tax each time you are paid which gives you the tax relief you are due throughout the tax year.

Using your tax code to distribute tax relief should mean you don’t need to make the same claim each tax year and only need to contact HMRC about the expenses you have claimed if something changes in the future.

Higher rate pension tax relief

Higher rate pension tax relief typically exists only for those who pay tax at the higher rate (40%) or additional rate (45%) that contribute to a private pension scheme which has a relief at source contribution arrangement.

Everyone should automatically get 20% tax relief on their pension contributions.

For eligible higher rate taxpayers you can claim an extra 20% tax relief and additional rate taxpayers 25%.

You can claim higher rate pension tax relief on your self assessment tax return, by writing to or calling HMRC’s helpline.

A claim for higher rate pension tax relief is not normally necessary if you pay into an occupational or public service pension scheme.

SIPP tax relief

When you start a self invested personal pension (SIPP) you will receive tax relief from the government when contributing to your SIPP.

The state contributes an extra 20% to any funds you deposit into your SIPP if you are a basic rate taxpayer.

For those in the higher (40%) and additional rate (45%) tax brackets tax relief increases to an additional 20% and 25% respectively.

The amount of relief you receive is contingent upon your individual circumstances (including your annual income) and the pension annual allowance.

Rent a room tax relief

The rent a room scheme is accessible to individuals interested in providing furnished lodgings to a tenant in their primary residence.

A significant advantage of this scheme is the potential to receive annual tax relief on rental income worth up to £7500 or £3750 if the property is rented jointly.

Entrepreneur tax relief (BADR)

Entrepreneurs relief represents a tax relief that minimises the capital gains tax due if you sell some or all of your business or it’s assets.

The tax rate for entrepreneurs relief stands at 10%, which is significantly less than the potential CGT rates of 18%, 20% or 28%.

As of April 2020 HMRC renamed entrepreneurs relief to business asset disposal relief or (BADR).

R&D tax relief

Research and Development (R&D) tax credits is a governmental incentive scheme aimed at UK based firms that make investments in innovation.

If your business is allocating resources towards innovation you may be eligible to lodge an R&D tax credit claim, which can result in either a cash payout and/or a reduction in your companies corporation tax bill.

For businesses filing their first claim it’s generally possible to backdate an R&D tax relief claim for the last two tax years.

Tax relief and tax free income

Securing the tax relief you are entitled to is great way to earn some tax free income and reduce your tax bill.

Understanding the tax rules that apply to your situation and knowing the right time to claim tax relief could result in significant tax savings and potentially give you tax free income for many years moving forward.

Regardless of whether you’re an employee or run your own business, it’s crucial to note that tax relief regulations are subject to adjustments by the government so staying abreast of any changes is worthwhile.