Tools & Equipment Tax Rebate for Tradespeople (2026-27)

If you're a tradesperson who buys tools or equipment for work, you can claim tax relief and get money back from HMRC. The system offers two main routes: you can either claim a flat-rate allowance (a fixed amount each year based on your trade), or claim the actual cost of what you've bought using receipts. For bigger purchases like machinery, you might use Capital Allowances which spread the cost over several years. Most tradespeople can claim back between £12 and £120 per year through flat-rate expenses, or potentially much more if they're buying expensive equipment and claiming actual costs. You can backdate claims for up to four previous tax years, meaning many tradespeople are sitting on unclaimed refunds worth hundreds of pounds.

Who can claim

You can claim tools and equipment tax relief if you're employed in a trade where you have to provide your own tools as a condition of your job. This typically includes:

• Motor mechanics and vehicle technicians
• Plumbers and heating engineers
• Joiners and carpenters
• Electricians
• Bricklayers and construction workers
• Plasterers
• Painters and decorators
• Hairdressers and barbers
• Chefs (for knives and specialist equipment)

The key requirement is that your employer requires you to provide these tools yourself. If your employer provides all necessary tools, or if buying your own tools is optional, you cannot claim. The expense must be "wholly, exclusively and necessarily" incurred in the performance of your duties [ITEPA 2003 s.336].

Self-employed tradespeople claim these expenses differently — through their Self Assessment tax return as normal business expenses. This guide focuses on employed tradespeople claiming employee expenses.

The two main claiming routes

Route 1: Flat rate expense allowances

HMRC recognises that certain trades routinely need to buy and replace tools. Rather than collecting receipts for every screwdriver and spanner, you can claim a fixed annual amount based on your occupation. These flat-rate expenses are set by industry agreements and vary by trade.

2026-27 flat rate allowances for common trades:

• Motor mechanics and vehicle technicians: £120 per year
• Joiners and carpenters: £80 per year (Class 3 trades)
• Plumbers and heating engineers: £60 per year (Class 3 trades)
• Electricians: £60 per year (Class 3 trades)
• Bricklayers: £60 per year (Class 3 trades)
• Hairdressers and barbers: £60 per year (Class 3 trades)

The actual tax relief you receive is not the full amount — it's the allowance multiplied by your tax rate. If you're a basic rate (20%) taxpayer claiming the £120 mechanic's allowance, you'll receive £24 per year (£120 × 20%). Higher rate (40%) taxpayers receive £48 (£120 × 40%).

Example: Marcus is an employed electrician earning £35,000 per year. He pays basic rate tax at 20%. He can claim the £60 flat rate expense for electricians. His annual tax relief is £60 × 20% = £12 per year. If he claims for four years (the maximum backdate), he receives £48 total.

The beauty of flat-rate expenses is simplicity — no receipts required, no calculations, just a straightforward claim based on your job title.

Route 2: Claiming actual expenses

If you spend more than the flat rate allowance on tools and equipment, you can claim your actual costs instead. You'll need to keep receipts and records of everything you buy.

You can claim for:

• Hand tools (hammers, saws, screwdrivers, wrenches, drills)
• Power tools (if not covered by Capital Allowances — see below)
• Specialist equipment specific to your trade
• Tool insurance premiums
• Repairs and replacements of existing tools
• Safety equipment required for your job (hard hats, safety boots, hi-vis clothing)

You cannot claim for:

• Initial clothing or ordinary clothing (even if you only wear it for work)
• Tools your employer provides or reimburses
• Tools you use partly for personal projects
• Improvements or upgrades you choose but don't need

Example: Joanna is a self-employed joiner working through an umbrella company (so technically employed). She spends £340 on new chisels, a hand saw, and replacement drill bits during 2026-27. The flat rate for joiners is £80. She's better off claiming her actual expenses of £340. As a basic rate taxpayer, she receives £340 × 20% = £68 tax relief, compared to £16 (£80 × 20%) under the flat rate.

To claim actual expenses, you must keep receipts and be able to demonstrate the tools were necessary for your employment. HMRC may ask for evidence if they review your claim.

Capital Allowances for substantial equipment

When you buy expensive equipment or machinery — something that lasts several years and costs hundreds or thousands of pounds — you typically can't claim the full cost in one year. Instead, you use Capital Allowances, which spread the cost over time.

How Capital Allowances work for employees

For employed tradespeople, Capital Allowances apply to equipment that:

• Costs a substantial amount (generally over £500, though there's no hard threshold)
• Has a useful life of more than one year
• Is plant or machinery used for your employment

Common examples include expensive power tools, welding equipment, specialist diagnostic machinery, or a professional toolbox system.

The standard rate for Capital Allowances is the Writing Down Allowance (WDA) at 18% per year on the reducing balance. This means:

• Year 1: Claim 18% of the purchase price
• Year 2: Claim 18% of the remaining value (82% of original)
• Year 3: Claim 18% of the remaining value
• And so on until the value is negligible

Example: Rashid is an employed mechanic who buys a £2,000 professional diagnostic computer in April 2026. He claims Capital Allowances:

• 2026-27: £2,000 × 18% = £360 allowance (tax relief £72 at 20%)
• 2027-28: £1,640 × 18% = £295 allowance (tax relief £59 at 20%)
• 2028-29: £1,345 × 18% = £242 allowance (tax relief £48 at 20%)

Over three years, Rashid claims £897 in allowances, receiving £179 in tax relief. He continues claiming the reducing amount each year until the equipment is sold, scrapped, or fully written down.

Annual Investment Allowance (AIA)

Self-employed tradespeople can use the Annual Investment Allowance to claim 100% of qualifying equipment costs in the first year (up to £1 million per year). Unfortunately, employed people claiming employee expenses cannot use AIA — you must use the standard 18% Writing Down Allowance.

This is one reason why self-employed tradespeople often have more generous tax treatment for equipment purchases than employed tradespeople.

How to make your claim

For total expenses under £2,500: Form P87

If your total annual employee expenses (tools plus any other work expenses like mileage, professional subscriptions, etc.) are under £2,500, you claim using HMRC's online P87 form.

The process:

1. Go to GOV.UK and search for "Claim tax relief for your job expenses P87"
2. Sign in to your Government Gateway account (or create one)
3. Select the tax year you're claiming for
4. Enter your employment details
5. Select your occupation from the list (this auto-fills flat rate expenses)
6. Choose whether to claim flat rate or actual expenses
7. If claiming actual expenses, enter the total amount
8. Submit the claim

HMRC typically processes P87 claims within 8-12 weeks. They'll either adjust your tax code for future tax relief, or send you a cheque/bank transfer for previous years.

For expenses over £2,500: Self Assessment

If your annual employee expenses exceed £2,500, you cannot use P87. You must register for Self Assessment and complete a tax return, even though you're employed.

On the Self Assessment return:

1. Complete the main return (SA100)
2. Complete the Employment pages (SA102)
3. In the "Employment expenses" section, enter your tools and equipment costs
4. For Capital Allowances, complete the Capital Allowances boxes showing your calculations

Self Assessment returns for 2026-27 are due by 31 January 2028 (online) or 31 October 2027 (paper).

Backdating claims

You can backdate claims for up to four previous tax years from the current tax year. In 2026-27, you can claim back to 2022-23.

Example: It's November 2026. Dean is a plumber who's never claimed his tools allowance. He can claim:

• 2026-27 (current year): £60 flat rate
• 2025-26: £60 flat rate
• 2024-25: £60 flat rate
• 2023-24: £60 flat rate
• 2022-23: £60 flat rate

Total allowances: £300. As a basic rate taxpayer, Dean receives £60 in tax relief (£300 × 20%). If he's a higher rate taxpayer, he receives £120 (£300 × 40%).

Many tradespeople have never claimed and are sitting on several years of unclaimed relief. It's worth checking even if you think the amounts are small — they add up.

Mixing flat rate and actual expenses

You must choose one method per tax year — you cannot claim both the flat rate allowance and actual expenses in the same year. However, you can switch between methods in different years.

Strategy tip: Claim flat rate in years when you spend little on tools, and switch to actual expenses in years when you make major purchases. Review your spending each April and choose the method that gives you the higher claim.

Common mistakes

Claiming for personal use items: If you use a tool both for work and personal projects, you can only claim the work proportion. HMRC may challenge claims for items that have obvious personal use (like a drill you also use for DIY at home). Be honest about mixed use.

Claiming ordinary clothing: You cannot claim tax relief on ordinary clothing even if you only wear it for work. Steel-toe boots and hi-vis vests required by your employer may qualify, but ordinary work trousers, shirts, or coats do not.

Not keeping receipts for actual expenses: If you claim actual expenses, HMRC can ask for proof at any time. Keep receipts for at least five years after the tax year. Digital photos of receipts are acceptable.

Claiming when employer provides tools: If your employer provides all necessary tools, you cannot claim. The relief is only for tools you must provide yourself as a condition of employment.

Forgetting to claim every year: Flat rate expenses don't automatically continue. You must claim each year, either through P87 or by ensuring your tax code includes the allowance. Set a reminder each April.

Mixing up employed and self-employed rules: Self-employed tradespeople claim tools as normal business expenses on their Self Assessment return, with more generous Capital Allowances. Employed people use the employee expenses system described here. If you're employed through an umbrella company, you're still technically employed for tax purposes.

Claiming capital items through P87 incorrectly: If you buy expensive equipment requiring Capital Allowances, you may need to use Self Assessment rather than P87, especially if the annual allowance pushes you over the £2,500 threshold. Get advice if you're unsure.

What about tool insurance and repairs?

You can claim tax relief on:

• Tool insurance premiums: If you insure your tools against theft or damage, the premiums qualify for relief
• Repairs and maintenance: Fixing or servicing existing tools qualifies
• Replacement tools: Replacing worn-out or broken tools qualifies

These costs can be included in your actual expenses claim or, if small and routine, may be covered by the flat rate allowance.

Record keeping

Even if you claim flat rate expenses (which don't require receipts), it's wise to keep some records showing:

• Your job title and employer
• That you're required to provide your own tools
• Examples of tools you've purchased (even without receipts, a list helps)

For actual expenses claims, keep:

• All receipts (paper or digital)
• Bank or credit card statements showing purchases
• A simple spreadsheet listing date, item, cost, and supplier
• Any correspondence with your employer about tool requirements

HMRC can enquire into claims up to four years after the tax year (longer if they suspect fraud), so keep records for at least five years.

What to do next

If you're an employed tradesperson who buys your own tools, you should be claiming this relief. Here's your action plan:

1. Check if you qualify: Are you employed and required to provide your own tools?

2. Gather information: Find out your occupation's flat rate allowance, or collect receipts if claiming actual expenses

3. Calculate potential refund: Work out what you could claim for the current year plus up to four previous years

4. Make your claim: Use P87 online for straightforward claims under £2,500, or register for Self Assessment if needed

5. Set up annual claims: Don't forget to claim each year going forward

For specific questions about your situation — like whether a particular tool qualifies, how to handle Capital Allowances, or which claiming method suits you best — chat with AI Tax at myaitax.info. The AI assistant can walk you through your exact circumstances and help you calculate your potential refund.

If you'd prefer someone to handle the entire claim for you, check receipts, deal with HMRC, and ensure you're claiming everything you're entitled to, AI Accountant offers end-to-end tax services for tradespeople. They'll review your last four years, submit claims, and set up ongoing annual claims so you never miss out again.

Most tradespeople are entitled to this relief but never claim it. Don't leave money on the table — even small amounts add up over time, and backdated claims can result in welcome lump-sum refunds of several hundred pounds.