Here’s an uncomfortable truth. Millions of people hand HMRC more than they need to every year, usually because nobody told them what they’re entitled to.
We’re payroll people, so spotting money that should be in your pocket is what we do. So grab a brew, because this is the full list. Every relief and allowance worth knowing about, from the big-ticket items to the little ones hiding down the back of the tax sofa.
Part 1. Reliefs on what you spend for work
Professional subscriptions
Pay a membership fee to a professional body to do your job? HMRC will probably give you tax relief on it. Think the CIPP for payroll pros, the NMC for nurses, RICS for surveyors or the CIPD for HR folk.
There are 3 conditions.
- The body has to be on HMRC’s approved list (known as List 3)
- The membership has to be relevant to your job
- Your employer can’t already be paying you back for it. Trade union fees usually don’t count.
Relief comes at your highest rate of tax. A £300 annual fee gets a basic rate taxpayer £60 back, and a higher rate taxpayer £120.
Employers, take note. If you pay an approved subscription directly for an employee, it’s free of tax and National Insurance for them. It’s one of the cheapest ways to show you’re invested in your team’s careers.
Uniforms, work clothing and tools
If you wear a uniform you have to wash, repair or replace yourself, you can claim a flat rate expense without keeping receipts. Most jobs get £60 a year, with higher set amounts for certain trades like nurses, engineers and construction workers.
The same goes for small tools and specialist kit you buy yourself. If your employer doesn’t reimburse it, you can claim relief on the cost.
Mileage allowance relief
Good news for drivers. For the first time since 2011, HMRC has raised its approved mileage rate. For 2026/27 it’s 55p a mile for the first 10,000 business miles, then 25p. Motorcycles stay at 24p and bikes at 20p.
Commuting doesn’t count, but other work journeys in your own vehicle do. If your employer pays you less than the approved rate, you can claim tax relief on the difference. If they pay nothing at all, you can claim relief on the whole lot. Delivery drivers, carers and field sales teams, this one’s for you.
Business travel and overnight stays
Travel to a temporary workplace, hotel stays and meals while you’re away on business all qualify for relief if your employer doesn’t cover them.
How to claim work expenses
If your total work expenses are under £2,500, claim online through HMRC’s P87 service or the HMRC app. Over £2,500, it goes through Self Assessment. HMRC usually adjusts your tax code, so the saving shows up in your pay.
You can backdate claims for up to 4 tax years. Right now that means reaching back to 2022/23, but only until 5 April 2027.
A word of warning. Claims companies will happily do this for you and pocket 30% or more of your refund. It’s a 10 minute job, so don’t be drawn in by the hard sell. Keep your money and submit the claim yourself.
The one that got away, working from home relief
We’d love to tell you to claim the old £6 a week. Sadly, we can’t. The flat-rate working from home relief was abolished from 6 April 2026, and employees can no longer claim it directly from HMRC, whether home working is a personal choice or written into their contract.
There’s still some good news. You can claim for the previous 4 tax years if you were eligible back then. And where the rules allow, employers can still reimburse employees for home working costs without deducting Income Tax or National Insurance. Employers, the ball’s in your court.
Mobile phones
This is a big one, and one we’ve covered before. Employers don’t have to report anything to HMRC or deduct Income Tax and National Insurance if both of these apply:
- The employer gives the employee only one mobile phone or SIM card
- The contract is between the employer and the network provider
Given what phones cost these days, that’s a very generous allowance. Food for thought for employers and employees alike.
Part 2. Allowances that reduce your income tax
Personal allowance
The big one. For 2026/27 the personal allowance is £12,570, the same as last year. Frozen again, which means that as wages rise, more of your pay gets taxed. Sneaky.
Earn over £100,000 and it starts to vanish. You lose £1 of allowance for every £2 you earn over £100,000, and at £125,140 it’s gone completely. That creates an effective 60% tax rate on income between £100,000 and £125,140. Pension contributions are the usual fix.
Marriage allowance
If one of you earns under the personal allowance and the other is a basic rate taxpayer, this is free money. For 2026/27 you can transfer £1,260, which could cut your partner’s tax bill by up to £252 a year. You can backdate it too.
Married couple’s allowance
For couples where one partner was born before 6 April 1935. For 2026/27 it cuts your tax bill by between £453 and £1,170 a year, depending on income.
Blind person’s allowance
For 2026/27 this extra allowance is £3,250, taking your total tax-free allowance to £15,820. If you don’t earn enough to use it, you can transfer the unused amount to your spouse or civil partner.
Savings and dividends
Your savings interest gets its own tax-free buffer. Basic rate taxpayers get £1,000, higher rate taxpayers get £500 and additional rate taxpayers get nothing. On top of that, the 0% starting rate for savings stays at £5,000 for people on lower incomes.
The dividend allowance stays at £500, but the rates above it have climbed. For 2026/27 the ordinary rate is 10.75% and the upper rate is 35.75%. Directors paying themselves in dividends, it’s time to rerun your sums.
Side income allowances
| Allowance | 2026/27 amount | Who it’s for |
| Trading allowance | £1,000 | Side hustles, from Vinted sales to dog walking |
| Property allowance | £1,000 | Small property income, like renting out a driveway |
| Rent a room scheme | £7,500 | Letting a furnished room in your own home |
Part 3. Saving and investing tax free
Pensions
Pension tax relief is the most generous relief going. Every £80 you pay in becomes £100 in your pot, and higher and additional rate taxpayers can claim a further 20% or 25% back through Self Assessment.
The annual allowance is £60,000 (or 100% of your earnings, if lower), and you can carry forward unused allowance from the last 3 tax years. Very high earners face a tapered allowance. When you retire, you can usually take 25% of your pot tax free, up to £268,275.
Paying in through salary sacrifice saves National Insurance too, for both employee and employer. Changes are on the horizon, with a £2,000 cap on NI-free sacrificed contributions planned from April 2029. Now’s a good moment to review your scheme.
ISAs
| ISA type | 2026/27 limit | The perk |
| Overall ISA allowance | £20,000 | No tax on interest, dividends or gains |
| Lifetime ISA | £4,000 (within the £20,000) | 25% government bonus, for a first home or retirement |
| Junior ISA | £9,000 | Tax-free savings for under 18s |
Heads up, cash savers. The cash ISA limit is set to drop to £12,000 from April 2027 for under 65s, with the full £20,000 still available for stocks and shares.
Venture capital schemes
For those with a bigger appetite for risk, the government rewards investment in small UK companies.
- The Seed Enterprise Investment Scheme (SEIS) gives 50% income tax relief on up to £200,000 a year.
- The Enterprise Investment Scheme (EIS) gives 30% relief on up to £1 million a year in qualifying companies.
- Venture Capital Trusts now get 20% relief on up to £200,000 a year, down from 30% before 6 April 2026, and you’ll lose the relief if you sell within 5 years.
VCT dividends within that limit are tax free, and so are gains when you sell.
These are high-risk investments, so always get proper financial advice first.
Tax-free windfalls
Premium Bond prizes, National Lottery wins and most betting winnings are all tax free. Your odds of hitting the jackpot are low, but at least HMRC won’t take a slice if you do.
Part 4. Capital gains tax (CGT) reliefs
| Relief | What it does |
| Annual exempt amount | Your first £3,000 of gains each year is tax free |
| Private residence relief | No CGT when you sell your main home |
| Spouse transfers | Assets pass between spouses and civil partners with no CGT |
| Business asset disposal relief | 18% CGT (up from 14%) on up to £1 million of lifetime gains when selling a qualifying business |
| Gifts to charity | No CGT on assets you donate |
Part 5. Giving and gifting
Gift Aid and payroll giving
Donate to charity with Gift Aid and the charity claims an extra 25p for every £1. Higher and additional rate taxpayers can then claim the difference back on their tax return.
Payroll giving is even simpler. Donations come out of your pay before tax, so you get full relief at your highest rate automatically. No forms, no fuss.
Inheritance tax allowances
| Allowance | Amount |
| Nil rate band | £325,000 per person |
| Residence nil rate band | £175,000 when passing your home to children or grandchildren |
| Annual gift exemption | £3,000 a year (unused amount carries forward 1 year) |
| Small gifts | £250 per person, per year |
| Wedding gifts | £5,000 to a child, £2,500 to a grandchild, £1,000 to anyone else |
| Gifts from surplus income | Unlimited, if regular and they don’t affect your lifestyle |
| Spouse and charity gifts | Unlimited |
Both nil rate bands can pass to a surviving spouse, so a married couple can potentially leave £1 million tax free. It’s also worth knowing that unused pension pots are due to come into the inheritance tax net from April 2027.
Part 6. Tax-free perks employers can offer
This is where payroll gets fun. Employers can give staff all sorts of benefits without triggering tax or NI.
| Benefit | The limit |
| Trivial benefits | Up to £50 a time (£300 a year cap for directors of close companies) |
| Staff parties and annual events | Up to £150 a head per year (go over and the whole amount becomes taxable) |
| Long service awards | £50 per year of service, for 20+ years |
| Mileage payments | 55p a mile up to 10,000 miles, then 25p |
| Relocation costs | Up to £8,000 |
| Pensions advice | Up to £500 a year |
| Employer pension contributions | Within the annual allowance |
| Mobile phone | 1 per employee (see above) |
| Eye tests and screen glasses | For regular screen users |
| Health screening | 1 check-up a year |
| Cycle to work scheme | Bikes and safety gear via salary sacrifice |
| Workplace nurseries | Employer-run childcare places |
| Electric company cars | Low benefit in kind rate of 4% in 2026/27 |
| Workplace EV charging | Free charging at work |
| Counselling and welfare support | Including employee assistance programmes |
| Work parking | At or near the workplace |
| Subsidised canteen | If available to all staff |
| Termination payments | First £30,000 tax free (statutory redundancy included) |
Used well, these add real value to your team’s package without adding a penny to anyone’s tax bill.
Part 7. Support for families
Tax-Free Childcare adds £2 for every £8 you pay in, worth up to £2,000 per child each year (£4,000 for disabled children). Many working parents also qualify for funded childcare hours.
Child Benefit is tax free too, as long as neither parent earns over £60,000. Above that, the High Income Child Benefit Charge claws it back gradually until it’s fully repaid at £80,000. Pension contributions can bring you back under the threshold, which is a lovely double win.
Get the most from your payroll
That’s a lot of allowances, and they change every Budget. The next Budget lands on 28 October 2026, and early signs point to tax rises. The small print trips up even the savviest business owners, which is exactly why we exist.
Our payroll pros keep track of every threshold, relief and rule change so you don’t have to. We’ll make sure your team gets every penny they’re owed, your benefits are set up the smart way, and your business stays compliant without the headaches.
If you want to lose the stress of keeping on top of all of these as an employer, get in touch.
