Originally published on 18th July 2017
Updated 11th October 2019
Staff Clothing and Tax: All You Need to Know
There’s no denying it; UK tax legislation is a minefield, whether you’re a mathematical genius or not. If you fail to report expenditure to the government or inform your employees of potential rebates, it could cost your organisation and staff a small fortune. One of the most misunderstood areas of taxation concerns work uniforms and personal protective equipment (PPE). Employers that provide clothing to employees have certain tax, National Insurance and reporting obligations, depending on several factors. Employees who purchase their own workwear, on the other hand, may qualify for tax relief from HM Revenue and Customs (HMRC).
What Is Staff Clothing?
Silly question? You would think so. From one perspective, you’re entitled to provide your staff with whatever clothing you choose. HMRC, however, maintains a very specific definition of which forms of clothing must be declared or are eligible for tax relief. In basic terms, staff clothing means garments or equipment that an employee is required to wear to carry out their duties within work hours. For these items to be considered deductible expenses by HMRC, they must be wholly and exclusively for business purposes, not just for basic warmth and decency.
This includes either of the following:
- A work uniform that makes the wearer recognisable as having a particular occupation; simply wearing similar colour or style garments is not sufficient.
- Protective clothing or PPE that’s a necessity due to the nature of the job (e.g. safety footwear, head protection and overalls).
Does Staff Uniform Have to Include a Logo?
In most cases, company uniforms with a logo would be defined as uniform, but not always. While it’s strongly advisable to have a logo on your staff uniform to prove eligibility to HMRC, this alone does NOT necessarily ensure it qualifies for tax exemption. HMRC states that individuals must be recognised as wearing a uniform by a person in the street. Some custom workwear may not fall into this category.
It’s actually possible to create a non-branded dress code that complies with this statement, but it’s recommended to add logos that are conspicuous and permanent, leaving no question as to an employee’s corporate identity. Company uniforms with a logo are also a great way to advertise to your customers and boost brand awareness.
To gain a greater understanding of what constitutes a staff uniform, visit the HMRC website, where you can find a detailed explanation and examples.
What Obligations Does an Employer Have?
UK companies are obliged to account for clothing provided to staff, and this is where it starts to get complicated. Without accounting for the required purchases, loaning of uniform and investment in repairs, an employer could find themselves in deep water.
Uniform and Protective Clothing
Tax payments and National Insurance contributions do not have to be made on staff uniforms and protective clothing as defined above, but they may need to be reported to HMRC.
- Where employers purchase, lend, clean or repair staff clothing for their employees, this must be declared on HMRC expenses and benefits form P11D.
- If employees buy their own uniform and PPE and are reimbursed by the employer in full or with a flat rate, these expenses are covered by an exemption and do not need to be included in HMRC reports.
Where an employer provides staff with ordinary clothing or businesswear that doesn’t fall within the uniform and protective clothing category, these benefits are subject to National Insurance and, in some cases, tax. How this should be accounted for by the employer depends on how the clothing was provided:
- Ordinary clothing purchased or lent by the employer must be reported to HMRC using form P11D, and Class 1A National Insurance is payable on the value of the benefit by the employer.
- For garments that are purchased, cleaned or repaired by the employee but paid back by the employer, this benefit must be added to the employee’s other earnings. PAYE tax and Class 1 National Insurance are paid by the employee.
- If the employee purchases non-durable clothing (e.g. tights or stockings) that is paid back by the employer, this benefit must also be added to the employee’s earnings and PAYE tax paid, but Class 1 National Insurance does not apply.
- Instructions on how to calculate the value of staff clothing for tax and reporting purposes can be found on GOV.UK. These calculations are based on whether the garments are given or lent and who pays for them initially.
When Can Employees Claim Tax Relief?
In addition to companies being able to claim tax exemption on staff uniforms and protective clothing, employees are also eligible for a tax deduction or refund under the right circumstances.
Tax-paying employees can claim tax relief against work clothing when ALL of the following apply:
- The employee pays for the clothing themselves, including cleaning, repairing and replacing it as necessary. Claims cannot be made if the items are cleaned or repaired at the expense of the employer.
- The employee has paid income tax for the year in which they are claiming.
- The employer requires the clothing to be worn for work.
- The garments and equipment meet HMRC’s definition of uniform or protective clothing, as described earlier.
Ordinary clothing is not classed as a work uniform or necessity — even if it is worn exclusively for work — and is, therefore, excluded.
What Value Can Be Claimed?
If all of the above conditions are met, employees can claim tax relief against the cost of cleaning, repairing and replacing their work uniforms or protective clothing. However, it’s important to note that this does not apply to the initial purchase cost.
Employees can either claim for the amount spent on work clothes if they have receipts as evidence of their purchases, or they can claim a flat rate deduction based on their occupation. It’s wise to keep an eye on these rates, as they may change as new tax legislation is introduced. Where industries or occupations are not itemised by HMRC, individuals may still be able to make a standard annual claim of £60.
Some occupations have higher flat rates due to requirements for specialist uniform and protective equipment. The highest claim amount currently available is £185, exclusive to ambulance staff working for the NHS or in private hospitals and nursing homes. Other occupations, such as joiners, carpenters and certain engineering roles, also attract deductions significantly higher than the basic £60 per annum.
The actual amount that ends up back in the employee’s pocket is determined by their salary. Basic-rate taxpayers receive 20% of the expenses claimed for, while higher-rate taxpayers can expect a 40% rebate.
How Can Employees Claim Tax Back for Staff Clothing?
Employees can claim tax relief online at GOV.UK or via a Self Assessment tax return. For those who have reclaimed tax before, this can also be done by phoning HMRC on 0300 200 3300.
Having helped organisations throughout the UK provide suitable uniform and PPE for their staff, WISE Worksafe can assist you in simplifying HMRC’s complex requirements and ensuring you comply. Contact us today and let us help you follow the necessary tax laws for your organisation while maximising tax-efficiency for your team. If you’re looking to update your staff uniforms or are interested in creating custom workwear, take a look at our range of workwear and corporate clothing. Don’t forget to ask us about our garment embellishment service — we can add embroidery or printed branding to most items of clothing.