Are tools tax deductible?

Yes, if you are paid under PAYE, tools are tax deductible because you can claim Capital Allowances which gives you tax relief on what you have bought.

Most mechanics want to use this system to claim for their tools because they spend more than the FRE allowable amount of £120 during any one tax year.

HMRC defines some larger working costs like a tool box as Capital Expenditure. It includes a surprising range of things like machinery, vehicles, patents, office equipment and your tools. That’s why the tax reliefs are called Capital Allowances. They are usually things that we would consider to be one off purchases, not every day consumables or regularly replaceable items.

Capital Allowances can be claimed by a variety of taxpayers; limited companies, partnerships, sole traders and PAYE employees. So, you can consider your toolbox and tools for Capital Allowances however you get paid.

Tool receipts must be kept

An important feature of this tax regulation is that you have evidence to show that you paid for the tools (capital items) you are claiming for. Ideally, HMRC prefer a paper or electronic receipt. It is not wise to submit a tools tax relief claim without already securing your evidence to support your claim.