Uniform Allowance HMRC

Your staff uniforms could be causing you to breach minimum wage rules. Here’s why (and how to comply). Find out about the Uniform Allowance HMRC provides.

(4 minute read)

In today’s top tip:

• How HMRC assess whether you’re paying appropriate wages
• Why staff uniforms can cause problems
• How to avoid breaking wage regulations

Minimum Wage and Staff Uniforms

All employers must pay at least the National Minimum Wage or Living Wage. These rates are based on the employee’s age.  

The current rates (correct as of June 2022) are as follows:

The responsibility for correct pay falls on the employer and the rates change frequently. This means you should always double check what you pay staff and keep up to date with minimum wage rises.

When assessing whether you’re paying an appropriate wage, HMRC doesn’t just consider the pay rates you award employees. They also consider deductions and obligatory costs your employees incur.

This is where staff uniforms can cause some problems.

If you require your staff to wear uniforms at work, and they pay for these uniforms themselves, HMRC will deduct this cost from their wage. Thus, you might think you’re paying staff minimum wage but when uniform deductions are considered, you may not be.

What are Staff Uniforms?

It might seem like a simple question with an obvious answer, but what is a staff uniform?

For many years, HMRC used what’s called the ‘High Street’ test. Essentially, would a stranger walking toward you on a high street recognise you’re wearing a uniform?

This test is often useful, but it doesn’t cover everything. In fact, for tax purposes, the term ‘uniform’ is quite broad. HMRC generally consider anything that you must wear as a condition of employment to be a uniform.

The broader definition can include things such as non-slip shoes, which may not be recognisable on a high street, but which are needed in certain roles.

How to Avoid Breaking the Rules

The simplest way to avoid this issue is to avoid uniforms altogether. However, this isn’t an option for many businesses. If you still want to keep your employees uniformed, here are some tips:

• Provide uniforms

If you provide the uniforms yourself, at no cost to employees, you remove the potential for a uniform deduction to drive down pay below minimum wage.

• Provide vouchers to cover the cost

Giving employees vouchers is a great option where there is a non-specific uniform. For example, if your employees need black, non-slip shoes but can pick from a variety of choices. This allows you to cover the cost whilst still giving your employees a choice.

• Increase wages

Increasing wages to meet the cost of uniforms ensures you’re meeting minimum wage even after HMRC considers deductions. However, you must remember that uniform costs are a deduction in the first pay period. This means the whole cost must be met by a wage increase within the first pay period.

• Provide a uniform allowance

Adding a dedicated uniform allowance to the first pay period also ensures you’re paying minimum wage even after deductions. Unlike a wage increase, the employee is compensated for the uniform in a single payment.

Uniform Allowance HMRC: Claim tax refund

Employees will also like to know that there is available tax relief if they have cleaned, repaired or replaced uniforms themselves.

Workers can claim hundreds back in tax for up to five years of expenses.

The standard flat-rate expense allowance for uniform maintenance is £60. By claiming a uniform tax refund, you’ll get back the amount of tax you would otherwise have paid on that £60. So if you’re a basic-rate taxpayer, you’ll get 20% of £60 as a rebate – which is £12. Higher-rate taxpayers will get back £24.

What Now?

There are several benefits to uniforms, but you should be careful to make sure that you’re always following minimum wage rules. This means double checking to make sure you properly account for deductions for uniform costs.

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Kind regards Ilyas