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What is working from home tax relief?

What is working from home tax relief?
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You may have heard about working from home tax relief. But what is it? Are you eligible? And if so, how do you claim for it? Here’s what you need to know.

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Working from home tax relief: what is it?

If your job requires you to work from home, HMRC allows you to claim tax relief for extra expenses you have incurred, such as higher energy bills. 

Working from home tax relief is not a new scheme. The pandemic has forced many people to work from home, and as a result, millions can now claim it.

You don’t have to have been told by your employer to work from home to be eligible. If you’re told to self-isolate by NHS Test and Trace, or the NHS app pings you a notice to isolate, then these are perfectly valid reasons to work from home.

How much tax relief can I claim?

To speed up the process of dealing with many thousands of claims over the past two years, HMRC says that anyone who has been required to work from home for at least one day can claim £6 a week for the whole tax year, as long as you have incurred extra costs (though you won’t need to show evidence). This is true for the 2020/21 and 2021/22 tax years.

If you feel your extra costs were greater than £6 per week, you’ll have to provide proof. You’ll also have to provide receipts if you wish to claim tax relief on any equipment you’ve purchased for home working, such as laptops or chairs. For more on this point, see our article on claiming tax relief on coronavirus working from home expenses

How can I claim working from home tax relief?

If you’re an employee, you can get working from home tax relief in two ways. 

1. Via the gov.uk website

Due to Covid-19, HMRC launched a special microsite to deal with the thousands of claims. To use the service, you must have (or sign-up for) a Government Gateway ID.

2. Via your employer

As an alternative to making a claim yourself, your employer may choose to pay you the tax relief instead. However, they are under no obligation to do so, so you may have to apply directly to HMRC.

Once you’ve made a claim, HMRC will amend your tax code accordingly.

Can the self-employed claim?

If you’re self-employed and have been required to work from home for at least one day, you can also claim for the whole 2020/21 and 2021/22 tax years. However you can’t do this using the gov.uk microsite. Instead, you must claim as part of your self-assessment tax return.

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Like employees, you can claim for the past four tax years, though for 2018/2019 and 2019/20, you can only claim for days you were required to work from home, where you faced higher expenses and not for the whole tax year. 

If you work at home for more than 25 hours a week, you may be able to use HMRC’s simplified expenses system to calculate all tax relief you may be eligible for. 

What is £6 worth after tax?

The £6 benefit is greater for those who pay the highest rates of income tax.

For example, if you pay the 20% basic rate of tax and claim £6 a week, the relief will be worth £1.20 per week, or £62.40 per year. Higher-rate taxpayers (40%) will be £2.40 a week better off, or £124.80 a year. Additional-rate taxpayers (45%) will benefit to the tune of £2.70 per week or £140.40 a year.

While £6 seems like an arbitrary figure, it’s likely that HMRC has settled on this figure due to the costs required to assess individual claims as a result of millions of people having to work from home due to Covid-19. This is also the likely reason behind HMRC’s generosity allowing anyone to claim for a whole tax year, regardless of the number of days actually worked from home.

Working from home tax relief: What else should I know?

1. It may be a bigger saving than you might think

While £6 a week may not seem like much, over the past two tax years, your entitlement could be worth up to £280. Plus, if you use HMRC’s microsite, making a claim shouldn’t take more than a few minutes.

2. Couples in the same household can both claim working from home tax relief

If you live with your partner in the same household, don’t think you can’t both make a claim, even if you share utilities. Working from home tax relief is an individual benefit.

3. Part-time workers can claim too

If you work part-time, you can claim the relief just like full-time workers.

4. If you claimed for the 2020/21 tax year, you must apply again

If you put in a claim for working from home tax relief for the 2020/21 tax year, you must make another claim if you want relief for the current tax year. 

If you didn’t claim on the last tax year, you can claim for both years (2020/21, 2021/22) this year.

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