If you’ve been asked to work from home this year because of Covid-19, even for just one day, you may be able to claim tax relief on the additional costs you have incurred.
What expenses can I claim for?
Employees who are required to work from home (i.e. it wasn’t their choice) have always been able to claim for the increased costs that they incur due to this, such as electricity and heating. Rather than try and calculate the cost of these expenses, HMRC sets a fixed rate per week that an employee can claim without any documentation or calculations to justify it. In the current tax year to 5th April 2021 this amount is £6 per week.
There are two ways you could benefit from the £6 per week rate:
1) Your employer could pay you £6 per week for every week you worked from home. This money would be tax free over and above your salary.
However, employers are not obliged to pay this allowance and many will not be prepared to do so, especially in the current climate with so many businesses struggling financially.
2) You can claim tax relief on £6 per week from HMRC directly. This £6 would then be treated as a deduction from your total income meaning you pay less tax. This is worth a tax saving of £1.20 per week for 20% tax payers and £2.40 per week for higher rate tax payers.
How much tax relief will I receive?
HMRC have confirmed that even if you were required to only work from home for one day, or you work part time, you can claim tax relief on the full £6 for 52 weeks of the tax year to 5th April 2021. That’s £312 (52 weeks x £6).
Tax relief on this amount for the whole tax year is £62 for a basic rate 20% tax payer and £125 for higher rate 40% tax payers.
If you believe that you have incurred more than £6 per week in additional household expenses since working from home, you will need to do detailed calculations to demonstrate these. You cannot include costs that would have been the same whether or not you worked at home, e.g. mortgage interest, rent, council tax or water rates, existing broadband subscription.
How do I claim?
There are three options for claiming the relief depending on your circumstances:
1) If you are an employee but also fill out a self assessment tax return for any reason, you can claim for this tax relief on your return.
2) If you have already claimed for only part of the year using a P87 form, fill in another online P87 form and, this time, claim for the whole year. This will not create a double claim, it will just update your claim for the whole year.
3) If neither of the above apply, HMRC have now set up a new service that will enable you to claim this tax relief more easily through your Government Gateway account. The tax relief will be given by an adjustment to your tax code. This means that you will not receive the tax relief as a cheque refund but you will pay less tax over the next few months on your salary.
How to claim using the new HMRC service
To use the third option and claim using HMRC's new service, you will need your government gateway ID or, if you don’t have one, you can set this up during the process.
Click here to start your claim.
First you will be asked whether you are only claiming tax relief on your expenses for working from home. For many people the answer will be yes.
However, there are other expenses you may be able to claim tax relief for as an employee but only if they are not reimbursed to you by your employer. See the links to HMRC guidance for these items below:
Once you've answered these initial questions, you will then need to log in to your Government Gateway account. If you don’t have one you can set one up by clicking on ‘Create sign in details’ as shown below.
Later in the process, you will reach a screen asking ‘When did you start working from home?’. The earliest date you can use is 23rd March 2020 and therefore claim two weeks from the previous tax year at £4 per week, if you were working from home at this point and incurred extra costs.
You will then be asked to confirm and submit your claim.
Do allow HMRC some time to amend your tax code as they are likely to be receiving a lot of these claims over the coming weeks.
If you are unsure whether you can claim for this relief or would like some support making your claim, do contact us.