Tax Saving Ideas for Employees

July 22, 2011 by  Filed under: Taxes 

Allowable expenditure

The rule for deducting expenses has been described as notoriously strict. Only those expenses that are incurred wholly, exclusively and necessarily in the performance of the duties of your employment can be deducted (Nolder v Walters 15 TC 380).

In addition you can deduct the cost of travelling in the performance of your duties. You are not allowed the cost of ordinary commuting. That is the journey from your home to your normal workplace.

The word necessarily has been defined to mean that it is an expense that must be incurred by each and every holder of the office or employment. That is the need is determined by the employer and not because you felt it necessary to incur the expenditure.

Use of your home for the purpose of your employment

You will need to work hard to convince HMRC but if you use your home for the duties of your employment, usually because you live and work some distance from your head office, e.g. sales manager living in Leicester for a firm with a head office in Reading, you can claim the additional cost of working from home.

You must be able to show that it would be unreasonable for the employer to expect you to travel on a daily basis.

Also you will need to show that the duties performed are “substantive duties”. That is they must be the core duties of the employment.

Your claim need not be restricted to circumstances where one room is specifically set aside and used only for the duties of your employment.

If you work from home you use extra lighting, heating etc., you could also have extra insurance cover e.g. for computers etc. You may even wash the company car using metered water!

I would review the expenditure and make a claim say, £5 per week. Remember to claim for all years in date!

Employers may contribute to your costs as an employee working from home, wholly or for part of the time. This contribution will be tax and national insurance free and payments of up to £2 per week will not need supporting evidence.

Larger amounts will need to be evidenced to show the payment is wholly for the additional expense incurred in carrying out the duties at your house. (Section 316A ITEPA2003).


The full cost of meals and accommodation while travelling or staying away on business is allowable as part of the cost of travel.

Make sure that when you obtain a dispensation you include amounts payable as subsistence to include inter alia an amount per night for non receptive accommodation.

Also include a non receptive day subsistence allowance in addition to the personal incidental expense allowance.

HMRC has now introduced an advisory system to aid employers who make subsistence payments to employees who incur allowable business travel expenses free of tax and national insurance.

  • Breakfast rate: Up to £5 for irregular starters where you leave home before 6am.
  • One meal rate: Up to £5 where you are away for at least 5 hours and have incurred the cost of a meal.
  • Two meal rate: Up to £10 can be paid where away for at least 10 hours and you have incurred the cost of two meals.
  • £15 rate: where you finish after 8.00pm following a normal day of work and you replace your usual meal at home with a purchased one.

Peter Clare

The Poacher turned Gamekeeper

This information has been honesty written with a view to helping you: I am, like most people, not perfect and I apologise for any in corrections. I cannot be held responsible for any consequences of you using the information unless I have been made aware of the full facts of the matter and have expressed an opinion thereon.

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