Working from home tax relief claims

19th November 2020

Given recent events, there has been a significant increase in people looking at making tax relief claims due to the additional costs incurred for working from home.

Previously (prior to the current tax year), employers could pay their employees a home working allowance of £4/week tax free.

If employers did not make such a payment, the taxpayer could make a tax relief claim for £4/week IF they were required to work from home. Please note that they could make no such claim if they choose to work from home. No receipts are required to substantiate this claim.

As an alternative, a taxpayer could make a tax relief claim based upon the “actual” additional costs incurred. Evidence would need to be kept to support such a claim and the claim could only be made for bona-fide additional costs incurred. This can be complex to calculate as the taxpayer will need look at what their costs would be without working from home and determine the additional costs thereon. This being the case, costs such as mortgage interest/rent, council tax, broadband etc. would not be allowable, as these costs would be incurred in any event.

HMRC have increased the home working allowance to £6/week as from 6 April 2020 (for the 2020/21 tax year) and have also confirmed that, due to the COVID19 pandemic, taxpayers can claim the relief for the full 2020/21 tax year, even if they have only been required to work from home for a short period of the year.

In this instance, the taxpayer must have been required to work from home for this short period (i.e. it wasn’t a choice between going to the office and working from home). This relaxation to the rules (with a full year claim being allowable for only a part year period) is set to be in place for this current tax year only.

HMRC have set up a new dedicated working from home portal that will allow taxpayers to claim the appropriate tax relief via their PAYE tax codes (see below). Taxpayers will need to have a government gateway (or set one up) to make the claim via this portal. https://www.gov.uk/tax-relief-for-employees/working-at-home

In terms of tax relief, this would amount to the following:

1. Basic rate taxpayer (income up to £50,000) – tax relief of £62.40 (£312 – £6/week – at 20%)

2. Higher rate taxpayer (income in excess of £50,000) – tax relief of £124.80 (£312 at 40%)

If you would like any further information on working from home tax reliefs. Please get in touch with Ward Williams and we will be delighted to assist on 01932 830664 or email enquiries@wardwilliams.co.uk.