Engineers starting their first job have a lot to think about, but they shouldn’t ignore their tax situation. The Student Engineer talked to UK tax professionals Tax Rebate Services to find out more.
Landing your first engineering job is a big deal. For many, this will be the first time being paid a monthly salary, and it’s important to know exactly what you’ll be taxed for.
What are Income Tax and National Insurance Contributions?
Income Tax and National Insurance are two of the main deductions from your monthly wages. This system is called Pay As You Earn (PAYE), and if you’re self-employed, you will have to take care of these contributions yourself via an annual Self Assessment.
On the subject of National Insurance, we can’t speak of NI contributions without mentioning your Personal Allowance, which refers to the amount of money you can earn before getting taxed.
The current personal allowance for the 2016-17 tax year is £11,000, which means you can earn a full £11K without paying a single penny of tax. However, anything you earn over this amount will be taxed at 20 per cent for salaries up to £43,000. Over and above this, the tax rate rises incrementally as you begin to earn more.
National Insurance Contributions are always taken out of your wage by your employer if you’re on a payroll with a registered company. This is only taken for compulsory things such as your state pension, but will depend on your employment and place of work.
What work-related expenses can I claim back?
If you’re a self-employed engineer, Tax Rebate Services have highlighted some of the work-related expenses that you may be able to claim back via your self-assessment form.
It’s well worth noting that you must keep a hold of all receipts, bills and relevant paperwork to be in with a chance of claiming back a tax rebate. HMRC may ask you for proof of both your expenses, and their relevance to your business use.
Tools & Clothing
If you work in certain sectors such as the building, construction or metalwork industries, you may have to wear uniforms or items such as protective clothing and gloves. The good news is you can claim tax relief on the maintenance, cleaning and replacement of these items.
The same applies for the essential tools of your trade, so if you’re required to purchase tools for your employer, then you should be compensated for those costs. If not, start keeping a record in the form of an Excel spreadsheet or Word document to keep a record of what you’d like to claim for.
Example 1
Harry has worked as a site supervisor on a building site for nine years. He is now required to wear a company-branded uniform, protective gloves and a helmet, which he is tasked to keep clean.
Harry can therefore claim a tax rebate for the maintenance costs of his uniform, including replacements if the company decides to rebrand, and an alternative uniform is required.
Mileage & Travel
If you‘re required to travel to building sites, or meet with contractors for an important meeting, then it’s possible to claim back for the mileage costs. According to HMRC, the first 10,000 worth of business miles can be claimed at a rate of 45p per mile. Any travel over 10,000 miles then drops to a reclaim rate of just 25p per mile.
Example 2
Helen is a structural engineer and makes regular trips during working hours to view ongoing projects. Sometimes, she travels from her home to the site, and then continues on to her workplace.
Helen can therefore claim a deduction for the travel expenses from her home to the site and then on to her workplace. However, she cannot claim for ‘normal’ travel between her home and directly to her place of work, as this is considered a part of her everyday commute.
Transporting Bulky Tools & Equipment
You can also claim the cost of using your car to transport bulky tools and equipment from your home to your place of work - just as long as the items are required to complete your contracted duties, and there is no secure area for you to store them at your workplace.
Example 3
Ben is a mechanical engineer whose main tasks are assembling and installing mechanical parts, components, machine tools and hydraulic power systems. He has to carry tools and machinery to and from his workplace every day in order for him complete his tasks.
Ben’s employer does not provide secure storage for him to store his tools and machinery at work, and therefore, Ben is entitled to a deduction for the expenses he incurs to transport his tools and machinery.
The above examples are just some of the work-related expenses you can claim for engineer-specific jobs, but you can see a full list of all the tax relief expenses - including details on how to make a claim on the HMRC website.
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