Money Box explains rules for working from home tax relief
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In 2020, HMRC relaxed the criteria and announced that everyone who was working from home due to COVID-19 lockdown measures could claim a £125 a year tax relief. However, with all the pandemic’s measures removed, millions of workers are now back in the office either full time or through hybrid measures. In response to this HMRC updated its guidance for the 2022-23 tax year taking this into consideration and has introduced further criteria which makes it harder for tax breaks to be claimed.
Over the last two years, if someone worked at home at least one day of the tax year, they could claim some tax back for the whole year with the amount that could be claimed being set at £6 a week.
Taxpayers were eligible to claim the relief at the rate they paid tax so a basic rate taxpayer could claim 20 percent of £6 and receive £1.20 a week. Higher rate taxpayers, paying 40 percent, were eligible to receive £2.40 a week.
Over the course of the year, this could mean taxpayers working from home could reduce the tax they paid by £62.40 or £124.80 respectively.
Taxpayers are also able to claim the exact amount of extra costs that have incurred above the £6 amount, but will need evidence such as receipts, bills, or contracts to do this.
This has now changed with the tax authority’s criteria stating that you cannot claim the relief if the worker “chooses to work from home”.
What is included under this is if an employment contract allows hybrid working, if you “had to work from home because of COVID-19” and if “your employer has an office, but you cannot go there sometimes because it’s full”.
HMRC’s guidance said that to be able to claim the relief one of the listed statements must apply.
The first is that the worker is unable to perform the job on the employers premises as they do not have the facilities.
Examples of this could include the employer having a small office with no space for the employee to conduct their work at all times or if the employer does not have an office.
The second is that the job requires the employee to conduct their work far away from the employer’s premises and it would be unreasonable to expect the worker to travel there everyday.
An example of this would be if the office space is based in London but the job requires the employee to be based in Glasgow.
However, taxpayers only claim for things to do with work such as business calls or the cost of gas and electricity for their work area.
The tax authority stated that you cannot claim “for things that are used for both private and business use”. This includes rent or broadband access.
At the top of the guidance, HMRC states: “If you previously claimed tax relief when you worked from home because of COVID-19, you might no longer be eligible.”
Tax experts have come forward to urge employees to check their PAYE tax codes as if HMRC has included the relief when you are no longer eligible then you could potentially end up with a surprise tax bill.
Robert Salter, Payroll and Employment Tax Client Service Director at the accountancy firm Blick Rothenberg recently said: “Employees should be reviewing their PAYE tax codes to clarify whether HMRC have included the home office relief within the notice of coding.
“If this is the case, unless they are still eligible for the relief in 2022/23 – they should contact HMRC to get the notice of coding corrected. Otherwise, they will have additional tax to pay at the end of the tax year.”
Before the COVID-19 pandemic hit, the Treasury would spend around £2million on the relief. However, this cost soared over the last two years.
HMRC have confirmed that it will continue to accept backdated claims for those who have not yet claimed stating that taxpayers will receive a “lump sum payment” for any successful backdated claims.
HMRC stated that taxpayers have until the 5 April 2025 to make claims for 2020-21 tax year, and until 5 April 2026 make claims for 2021-22.
HMRC introduced the online portal for claimants in Autumn of 2020 which allowed taxpayers to claim the relied easier. This will also remain in place until the tax authority stops accepting backdated claims.
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