With work from home where possible guidance in force for many months now, many of us have been required to work from home during the COVID-19 pandemic.
And whilst there have probably been highs and lows associated with this new working pattern, there are some benefits in that you will most likely be eligible for tax relief if you have been working from home.
What tax relief can employees working from home claim?
If you have to work from home then you may be entitled to claim tax relief on a number of household expenses, including:
- gas and electricity
- metered water
- business phone calls, including dial-up internet access
Tax relief can be claimed on the proportion of bills relating to your work.
It may also be possible to claim some tax relief on equipment you have had to buy relating to your work
There are two ways to claim tax relief for working from home:
- You can either claim a fixed amount per week – if you take this approach, you do not need to provide evidence of your extra costs
- You can claim the exact amount of extra costs you’ve incurred above the weekly amount. If you take this approach, you’ll need to provide evidence of the extra costs such as receipts, bills or contracts
What is the working from home tax relief allowance for 2021-22?
From April 2020 the weekly amount that tax relief can be claimed on without having to provide evidence of costs was increased to £6. Prior to April 2020, the maximum amount that could be claimed a week was £4.
If you are eligible, you can claim tax relief based on the rate at which you pay tax.
For example, if you pay the 20% basic rate of tax and claim tax relief on £6 a week you would get £1.20 per week in tax relief (20% of £6).
For the 2020/21 and 2021/22 tax years, this means you could reduce your annual tax bill by:
- £62.40 for those who pay the 20% basic rate of tax
- £124.80 for those who pay the higher rate of tax
Who can claim tax relief for working from home?
You may be able to claim tax relief for working from home if you have to work from home on a regular basis – either on a full or part time basis. You cannot claim tax relief if you choose to work from home.
However, the COVID-19 pandemic has created a unique set of circumstances with an increased number of people working from home. As a result the government state that workers can claim the full year’s entitlement if they have been told to work from home by their employer, even if it has been for one day during the tax year.
If you had to work from home during the 2020/21 tax year and haven’t claimed for the tax relief yet, then it isn’t too late. HMRC have said they will accept backdated claims for up to 4 years with the amount owed paid in a lumpsum.
Check if you are eligible to claim tax relief for working from home on the HMRC online portal
How to claim tax relief for working from home
As an employee you can apply directly for tax relief relating to working from home.
Claiming a fixed amount a week
If you choose to claim a fixed amount per week then you can complete your claim via the HMRC online portal. You will need a Government Gateway user ID and password. If you are making a claim for the current tax year, then your PAYE code will be changed, and you’ll pay slightly less tax each month. If you are claiming for the last tax year, then you will receive a lump sum payment.
Claiming tax relief for your exact working from home expenses
If you choose to claim tax relief on the exact amount of extra costs you have incurred because the basic weekly amount doesn’t cover your costs you can again do this in two ways
- Complete a self-assessment and add your claim to this
- Complete the P87 form which allows workers to claim back expenses up to a maximum of £2,500
Claiming working from home tax relief if you usually complete a self-assessment tax return
If you complete a self-assessment tax return, then you won’t be able to use the online portal to claim tax relief for working from home. You will need to apply for the tax relief in your tax return instead.
Changing working patterns and working environments can change a businesses or individuals risk profile which can have a knock-on impact on your insurance products. Working from home for example can impact your home insurance, or you may have increased need for cyber insurance if more of your workforce is working remotely. Get in touch with us today to discuss your business insurance needs if you think you may have been affected by any of the many changes which have taken place over the last 18 months. You can call us on 020 8290 9080 or email us at email@example.com.