Tool allowances

Our experts tell you what HMRC need to know if you provide a tool allowance to your employees

Our experts at DSR Tax Claims know how hard it is to find good, quality information about HMRC’s tax regulations that is easy to understand, and that’s why we have created these handy guides to tell you everything you need to know. Our aim is to make life easier for our clients and that is why we want to share our expertise with you. You can also call our friendly team on 0330 122 9972 – we’re the tax experts you can trust.

What is a tool allowance?

HMRC consider a tool allowance to be a payment you give to an employee which is used to buy tools that are only to be used in doing their job, not for personal use.

If you provide a tool allowance to your employees, you might have to report this as a benefit to HMRC and there might be additional tax and National Insurance to pay.

What should you report and pay?

Some tool allowances are covered by exemptions, which means that they don’t need to be reported to HMRC or included in end-of-year reporting to HMRC. Uniforms and tools for work are expenses which are covered by these exemptions, which have replaced the older-style dispensations.

If the tool allowances you provide aren’t covered by an exemption, you need to report the allowance on your P11D. If you allow these tools to be used privately by your employees, HMRC consider the tool allowance to be extra earnings so needs to be added to their other earnings and then PAYE tax and Class 1 National Insurance should be deducted through your payroll.

How can DSR Tax Claims help?

We aim to make life as simple as possible for our clients and that includes giving you the information you need to make your taxes (and your life) simpler and less stressful.  Our team of experts at DSR Tax Claims are always on hand to help our clients and our excellent standing with HMRC means that we can make sure you don’t fall foul of their regulations, while claiming your maximum tax relief. We can even take care of all that paperwork and deal with HMRC on your behalf too. Call our friendly team on 0330 122 9972 – we’re the tax experts you can trust.

This page was last updated on 07/11/2018.

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