Top tax saving tips for employees
When household expenses are soaring, could reducing your tax bill help? Here are a few tips to help you save money.
Do you have a fixed place of work and use your own car to travel to clients? Are you submitting an expense claim to your employer for these journeys? If your employer doesn’t reimburse you for business travel, you can reclaim your travel expenses via a specific employment expenses claim, called form P87, or via a self-assessment tax return (note, you can’t claim your travel from your home to your fixed place of work). HMRC’s approved mileage rates for a car is £0.45 per mile for the first 10,000 miles and £0.25 for miles in excess of 10,000. Therefore, if you travelled 12,000 business miles a year, you could reclaim expenses of £5,000 tax free.
Do you pay for your subscriptions personally rather than your employer paying them on your behalf. If you do, you may be able to claim tax relief for professional subscriptions and union subscriptions paid (provided the subscription is on HMRC’s approved bodies list). For example, if you are a higher rate taxpayer and you paid your own subscription, you could save tax at 40% on the subscription paid.
Working from home
Does your employer require you to work from home (not as a result of you choosing to work from home, being required to work from home because you have COVID-19 or your office being full)? If so, you could either claim tax relief on £6 per week (from 6 April 2020) or claim tax relief on the exact amount of extra costs incurred at home. This would mean a higher rate taxpayer could get tax relief of £124.80 per year.
Salary sacrifice arrangements for pension contributions
Are you paying into your employer pension fund out of your net salary? If you are, have you considered salary sacrificing your pension contribution? By doing this, you agree to give up some of your salary. The money then ‘given up’ would be paid by your employer straight into your pension fund. This would reduce your gross salary, which reduces your tax, national insurance contribution and student loan repayments (if applicable).
Trivial Benefits Exemption
HMRC have set a £50 value on what they regard as trivial. This is a benefit you can give to an employee without the need to report it on a P11D. The gift must be non-cash and the benefit must be personal, e.g. a Christmas present, flowers for an ill employee or a gift to mark a wedding/birthday, etc. The gift cannot be in recognition of work done or as a reward for exemplary service etc. The £50 limit is per individual and per benefit. Directors of close companies, and their family members who are also employees, will be limited to an annual cap of £300 (6 x £50).
Are you required to purchase specialist workwear? If you are required to purchase specialist work related clothing, you can claim tax relief on the cost e.g. safety boots, etc. You can also claim a flat rate expense for uniform maintenance i.e. for washing your work protective clothing/uniform. The flat rate depends on your job and what industry you work in – joiners and carpenters are entitled to a flat rate expense of £140 per year, while nurses are entitled to flat rate expenses of £125 per year. This would mean that if the nurse was a higher rate taxpayer, they could get tax relief of £50 per year.
These are just a few examples, but there are many more effective ways to save tax. If you would like to speak about the above or ask about other tax efficient savings, please do not hesitate to get in touch with your usual BHP contact or call 0333 123 7171.