Understanding which employment expenses qualify for tax relief can effectively reduce your tax liability, though the rules are strict.

Generally you can deduct employment expenses if you incur the cost yourself without reimbursement from your employer, and the expense qualifies under one of these categories:

The General Rule – Wholly, Exclusively and Necessarily

Employment expenses are deductible if incurred wholly, exclusively and necessarily in performing employment duties. This definition is very strict, with many claims failing in court due to its narrow scope.

Wholly and Exclusively – The expense must be incurred solely for employment duties with no personal use. HMRC may allow expenses with both employment and personal elements where personal use is incidental or you can clearly separate the expense between personal and employment use.

Necessarily – The expense must be essential for performing job duties. If you could do your job without incurring the expense, it fails the necessary test and is not allowable.

In the Performance of Duties – Only expenses incurred while doing your job are allowed. Expenses that prepare you for work or help you perform your duties better are not allowable.

Real-World Example: Wholly & Exclusively

Sian Williams, a BBC Breakfast newsreader, attempted to deduct clothing costs when reading the news, arguing the clothes were used solely for work duties and met the “wholly and exclusively” test.

HMRC disagreed, arguing the clothing served a dual purpose – they provided Sian warmth and decency as well as allowing her to read the news. Since it was impossible to separate the clothing expenses into employment and personal use, HMRC ruled none of the clothing costs were deductible.

The court ruled in HMRC’s favour, explaining there was a dual purpose. Interestingly, if Williams had been self-employed, she might have been able to deduct these expenses.

Real-World Example: Necessary & In Performance of Duties

In Fitzpatrick v CIR, a journalist claimed newspaper purchases were deductible under the general rule, arguing their employer required newspaper reading as part of job duties and the expense satisfied the wholly, exclusively and necessarily tests.

The court rejected this claim, ruling that although reading newspapers would likely make a journalist better at their job, it was not a necessary expense incurred in the performance of duties. This highlighted the difference between expenses that prepare you for work (not deductible) and expenses incurred while actually working (potentially deductible).

Professional Fees & Subscriptions

Professional subscriptions can be deducted where payment is made to an approved body and membership is relevant to your profession. For example, a tax adviser can deduct their annual Chartered Institute of Taxation subscription as it’s an approved body related to their profession. However, a doctor cannot deduct the same subscription as it’s not relevant to their profession.

Professional fees are deductible where payment is a condition to practise your profession and the fee directly relates to that practice. For example, if you drive a bus and pay for your bus driving licence yourself, it’s deductible as having a bus licence is a condition of being a bus driver and directly related to the employment of driving a bus.

Real-World Example: Professional Fees

Mr Edgar was an airline pilot who held a commercial licence in South Africa. When he moved to the UK, the Civil Aviation Authority (CAA) required him to complete additional training to fly in the UK.

Edgar claimed a deduction for the professional fee paid to join the CAA and attempted to claim training costs as deductible professional fees, arguing that since the CAA required the training, these expenses should be considered part of the professional fee.

The court held that “fee” should be interpreted narrowly. The professional membership fees were allowed as deductions as these were a condition to fly and relevant to his profession. However, training costs paid to third-party flying schools were not considered part of the professional fee and were therefore not deductible.

Travel & Subsistence

If you have to travel for work, you may be able to deduct the costs of travel and subsistence from your earnings. The rules are strict and you can only deduct the costs if:

• You have to travel in the performance of your duties (for example, where you’re a courier)
• You have to attend a place to be able to perform your duties (for example, a temporary workplace)

Permanent Workplace

Generally, your permanent workplace is where your employer expects you to be. For example, if you work in a factory, this would likely be your permanent workplace. Travel from home to your permanent workplace is called ordinary commuting and is not deductible.

Important points to remember

• If you’re travelling from home to somewhere nearby your permanent workplace, this won’t be allowable
• It’s possible to have more than one permanent workplace
• If your employer reimburses your ordinary commute, it will be treated as salary and taxed accordingly

Temporary Workplace

Unlike ordinary commuting, travel from home to a temporary workplace is deductible. A temporary workplace is a place where you perform employment duties for a limited duration, generally this must be for less than 24 months. However, if you spend less than than 40% of worktime at the temporary workplace, the 24-month rule doesn’t apply.

For example, assume you live in Wokingham, your permanent office is in Reading, and your employer sends you to work at a client site in Manchester. 

• Travel from your home to the Reading office is ordinary commuting and not deductible, in any case.
• If you work three days in Manchester (60% of your time), you can deduct travel costs up to 24 months only. After that, the Manchester office becomes a permanent workplace.
• If you work one day in Manchester (20% of your time), you can deduct travel costs even if you continue working there after 24 months

Remote Working

For hybrid workers who split their time between the office and home, travel expenses between these locations will typically not be deductible as this constitutes ordinary commuting.

However, travel expenses may be deductible if your home qualifies as a permanent workplace. HMRC may treat your home as a workplace if you perform substantive employment duties at home as a job requirement rather than personal choice, and your employer either provides no suitable workplace or it is impractical for you to work there.

When these conditions are satisfied, your home may become a permanent workplace, and travel costs to your employer’s office may be deductible from your earnings.

What Travel and Subsistence Can Be Deducted

If a journey qualifies as an allowable business journey, you may be able to deduct the following costs from your earnings:

• Travel costs e.g., mileage allowance when using your own car or rail fare
• Accommodation e.g., hotel when you’re required to stay overnight
• Meals e.g., dinner when working at a temporary workplace

Real-World Example: Home as Workplace

Mr Evans was a civil servant who lived in Norfolk and worked in Leeds. Evans agreed to an optional homeworking scheme offered by his employer. This meant he could work at home four days a week, having  to travel to the office in Leeds one day a week. Either  or his employer could cancel the homeworking arrangement at any time.

Mr Evans argued that travel costs to the Leeds office should be deductible and it was a temporary workplace. However, HMRC successfully argued that living in Norfolk was Evans’ choice, not a requirement of the job. The Leeds office was deemed a permanent workplace, meaning the travel was ordinary commuting and not deductible.

Real-World Example: Permanent vs Temporary Workplace

Mr Nowak was a technician separately employed by different UK nuclear power stations on a temporary basis. Nowak travelled from his Yorkshire home to each nuclear power site and claimed mileage deductions for travel costs, believing each was a temporary workplace.

HMRC successfully argued that as he had entered separate employment contracts for each nuclear power site, each site is where that employer expected Mr Nowak to be. Mr Nowak has multiple permanent workplaces and a deduction for travel was not allowed.

If Nowak had been employed under a single contract with temporary assignments to different nuclear sites, then his travel costs would likely have qualified for tax relief under the temporary workplace rules.