Tools Tax Rebate using Capital Allowance for Employees

Do you work as a Builder, Mechanic, Domestic Engineer, Electrician, Beautician, or any other job in which you need to buy tools? If your answer is ‘yes’ then this article may help you get a tax refund cheque. HMRC allows you to claim back tax on tools or machinery you bought or hired for your job.

Tool tax rebate’ is generally the overall tax rebate available for tools / equipment used for your job (not for self employed) for which your employer has not paid.

For a simple Rebate without any receipts then the ‘Flat Rate Expense’, is a fixed amount by HMRC for different professions. The maximum flat rate for tools is £120 per annum at 20% Rebate which means if somebody bought upto £120 of tools a year then he would get £24 without any receipts.

If you have spent more than the tool allowance (£120) during the tax year and have receipts or activity reports to support your claim, then you can submit a capital allowances claim. Under this scheme you will get a full Value Tax Rebate of your Tools upto £2500 under your PAYE , amounts spent above £2500 have to be claimed via self assessment.

The most common assets which you may purchase and that will qualify for capital allowances are as follows:

  • Computer, printer, etc
  • Tools, for example mechanics, lawnmower, saw, etc
  • Specialist machinery

What does not count as Plant and Machinery ?

You cannot claim capital allowances on:

  • things you lease – you must own them
  • buildings, including doors, gates, shutters, mains water and gas systems
  • land and structures, for example bridges, roads, docks
  • items used only for business entertainment, for example a yacht or karaoke machine

The best scheme for Tax Rebate is the annual investment allowance (AIA) which provides 100% tax relief on assets qualifying as plant and machinery, subject to an annual maximum and excluding cars. Also, it is not possible to claim the AIA on assets which you owned and used for another reason (such as for personal use) before using them within the business, in which case you may use the small pools allowance or claim a writing down allowance (18%) in the main general pool.

For example, if you buy a drill or maybe a computer for your job and you also have the receipts of these items then you can claim Capital Allowance under the AIA scheme and get a FULL Rebate.

Let’s talk about how to claim!

There are other work related expenses which many employees never realise that they can claim a tax rebate. An Online work expense calculator can work out how much you could claim.

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