For many of us, coronavirus means working remotely. But did you know that if your employer tells you to work from home, even if it’s just for one day, there’s tax relief available? Here’s what you need to know about the working from home allowance, who qualifies, and how to claim it.
Plot your path towards financial freedom with our Hero’s Journey tool!
MyWalletHero is here to help you learn about taking control of your money, whether that’s paying off debt, working towards a short-term money goal, or investing for your future.
This tool can help you understand the next steps on your journey – simply choose a goal that best describes your current interests to get started.
What is the working from home allowance?
The UK government recommends that, right now, everyone works from home where possible. So, the working from home allowance lets you claim certain tax-deductible costs. But how does it work, and what exactly can you claim for? Let’s take a look.
You can claim a flat rate of £6 per week for utilities like heating and electricity. That means you’re saving between £1.20 and £2.40 a week on tax, depending on what tax band you’re in.
- You don’t need any proof – all you need to do is claim.
- If you want to claim more than £6 per week, you need evidence.
This actually isn’t a new initiative – it’s always been possible to claim utilities expenses. It’s just there’s more awareness around it because so many people are working from home.
Bought any equipment like a desk or an office chair? So long as it’s used solely for work purposes, there are two options:
- Claim the cost back from your employer.
- Claim tax relief from HMRC as part of your working from home allowance. Just remember you’ll need proof of purchase.
If you still need to wear a uniform, and you’re required to buy, maintain and clean it, you could apply for tax relief. This doesn’t apply to PPE – your employer needs to reimburse you for purchasing this.
If you want to claim for miscellaneous things like work-related phone calls, you can, but you’ll need receipts to show the exact amount.
What you can’t claim for
All that said, there are some costs you can’t claim back, including:
- Mortgage interest or payments
- Council tax
- Water (unless it’s metered)
- Broadband (unless you installed it because you’re working from home)
You should always check with HMRC if you’re unsure whether something’s tax-deductible or not.
How do I make a claim?
There are two ways to claim a working from home allowance:
- Create a Government Gateway ID and use HMRC’s dedicated service for processing these claims.
- As part of your annual tax return, if you file your own returns.
HMRC will change your tax code, and you’ll pay less tax each month for the tax year. You won’t get a lump sum payment.
Could you be rewarded for your everyday spending?
Rewards credit cards include schemes that reward you simply for using your credit card. When you spend money on a rewards card you could earn loyalty points, in-store vouchers airmiles, and more. MyWalletHero makes it easy for you to find a card that matches your spending habits so you can get the most value from your rewards.
Are part-time workers eligible?
Yes, and you can still claim the £6 per week, too. All that matters is that you’re told to work from home. It doesn’t matter:
- How many hours you work
- If you work in the office on some days, and remotely on other days
- Other employees are still working in the office
So, don’t be put off applying for the working from home allowance just because you’re part-time.
What if my employer gives me a working from home allowance?
If your employer gives you a working from home allowance, you can’t claim any extra tax relief. The initiative is aimed at people who can’t get tax relief from their employer.
Can I claim if I choose to work from home?
No. This specific tax relief is only available to people required to work remotely. So if the office is open and you decide to work from home instead, you’re probably not eligible for the scheme.
What does working from home mean for my insurance?
So, if you’re working from home, you’re probably wondering if it affects your car or home insurance premiums. Here’s what you should know.
You don’t need to tell your car insurance company if you’re working from home due to coronavirus. You’ll still be covered under your normal policy. But it might be worth contacting your insurer to see if there’s a discount available for driving less.
Just be sure to check if there’s an admin fee for making any policy changes, though.
If you’re just doing clerical or office work from home, there’s no need to tell your home insurance provider. The rationale for this is, because it’s not your choice to work remotely, you shouldn’t be penalised for it.
You do need to inform them if you’re seeing clients at home, because this might affect your cover.
The working from home allowance means you’ll pay less this tax year, which is a welcome relief for most people. Just make sure you’ve got the relevant evidence if it’s required, and check with HMRC if you’re unsure.
Some offers on MyWalletHero are from our partners — it’s how we make money and keep this site going. But does that impact our ratings? Nope. Our commitment is to you. If a product isn’t any good, our rating will reflect that, or we won’t list it at all. Also, while we aim to feature the best products available, we do not review every product on the market. Learn more here. The statements above are The Motley Fool’s alone and have not been provided or endorsed by bank advertisers. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Barclays, Hargreaves Lansdown, HSBC Holdings, Lloyds Banking Group, Mastercard, and Tesco.