What Expenses Can I Claim as a PAYE Employee? 2026/27 UK Guide

Clients operating as PAYE employees often assume they can claim tax relief for the everyday costs of doing their job. However, the statutory rules for employee expenses are deliberately restrictive.

If your client asks, “What expenses can I claim as a PAYE employee?” during the 2026/27 tax year, you must apply the strict statutory gateway found in the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003). Furthermore, the 2026/27 tax year brings a major legislative change that entirely abolishes the long-standing homeworking relief for non-reimbursed employees.

The General Rule: “Wholly, Exclusively and Necessarily”

The foundation of all employee expense claims sits within section 336 of ITEPA 2003. To claim a deduction from earnings, the employee must be obliged to incur and pay the amount as the holder of the employment, and the expense must be incurred “wholly, exclusively and necessarily in the performance of the duties of the employment.”

This test is exceptionally difficult to meet. It requires the expense to be objectively necessary for any person doing that specific job, not just a personal choice made by the current employee. In the historical case of Lomax v Newton, Vaisey J described this test as “notoriously rigid, narrow and restricted in their operation”.

“An expenditure may be ‘necessary’ for the holder of an office without being necessary to him in the performance of the duties of that office; it may be necessary in the performance of those duties without being exclusively referable to those duties; it may perhaps be both necessarily and exclusively, but still not wholly so referable.”

The 2026/27 Homeworking Relief Ban

For the 2026/27 tax year, the government has fundamentally altered how employees claim home office costs.

Historically, employees could claim a flat rate of £6 per week (or their actual additional costs) for working from home under section 336 ITEPA 2003.  However, section 21 of the Finance Act 2026 inserted a new section 360B into ITEPA 2003.  This new provision explicitly states that no deduction from earnings is allowed for additional household expenses which the employee incurs in the performance of their duties at home.  This measure took effect on 6 April 2026, meaning employees can no longer claim this tax relief if they bear the cost themselves.

The Alternative: Employer Reimbursement

While the employee cannot claim a tax deduction, employers can still step in. Section 316A of ITEPA 2003 remains in force, allowing an employer to make tax-free payments to reimburse the employee for reasonable additional household expenses incurred while carrying out duties at home under formal homeworking arrangements.

Travel and Mileage Expenses

Travel expenses fall under section 338 of ITEPA 2003 rather than the general rule. An employee can deduct travel expenses if they are obliged to incur them and the travel relates to necessary attendance at any place in the performance of their duties.

Crucially, the legislation explicitly prohibits deductions for “ordinary commuting”.  The rules define ordinary commuting as travel between an employee’s home and a permanent workplace.

Approved Mileage Rates

If an employee uses their own car or van for allowable business travel, they cannot deduct their exact fuel and maintenance costs. Instead, they claim relief based on statutory mileage allowance payments under section 230 of ITEPA 2003.  For the 2026/27 tax year, the rates remain at 45p per mile for the first 10,000 business miles in the tax year, and 25p per mile thereafter.  Motorcyclists can claim 24p per mile, and cyclists can claim 20p per mile.

Calculation: If an employee drives 1,500 allowable business miles in 2026/27, their statutory allowance is £675 (1,500 miles × 45p). If the employer only reimburses £300, the employee can claim a deduction for the remaining £375 against their PAYE income.

Professional Fees and Subscriptions

Employees who must maintain professional registrations can claim tax relief under section 343 of ITEPA 2003.  The employee can deduct the fee if their duties involve the practice of the profession and the registration, certification, or licensing is a condition that they must meet to practice the profession in the performance of their duties.

Uniforms and Flat Rate Expenses

Where employees must wear and wash distinct uniforms or protective clothing, HMRC provides an administrative easement. Rather than tracking exact laundry costs (which would technically fall under section 336), employees can claim a pre-agreed “Flat Rate Expense” deduction based on their specific industry.

HMRC’s Employment Income Manual (EIM32712) sets out these rates.  For example, agriculture workers can deduct £100, while joiners and carpenters in the building industry can deduct £140 per tax year.

Agency Fees for Entertainers

A specific statutory exception exists for entertainers (defined as actors, dancers, musicians, singers, or theatrical artists). Section 352 of ITEPA 2003 allows these employees to deduct agency fees paid to a registered employment agent.  However, the legislation caps this deduction. The allowable expense cannot exceed 17.5% of the taxable earnings from that specific employment in the tax year.

Summary of 2026/27 PAYE Employee Expenses

For completeness, if an employee seeks to claim back overpaid tax for allowable expenses, they must generally submit a form P87 to HMRC, or include the expenses on their Self Assessment tax return if their total expenses exceed £2,500 or they are already within the Self Assessment regime. Any adjustment will usually be applied to the employee’s tax code for future years.

Next steps: Advise your clients immediately about the abolition of the section 336 homeworking relief for 2026/27, and encourage employers to implement formal section 316A reimbursement policies to maintain tax efficiency for remote workers.