Working from home tax relief: What you need to know to claim
18th May 2021
Dan Wilton See profile
With the new tax year also comes the end of potentially a whole tax year of working from home for some, due to the impact of COVID-19.
There has been a fixed rate expense that can be claimed for individuals that work from home in place for several years, and with the way the country has had to adapt over the past year, the number of individuals working from home has rapidly increased.
Consequently, HMRC have updated their guidance and claim process to make this as easy as possible to obtain.
What tax relief can I claim working from home?
If you’re required to work from home, part or full time, you may be entitled to claim tax relief to help accommodate for the increased household bills.
This relief contributes to increased daily costs, such as electric bills, but not costs that would be incurred regardless (mortgage or rent). You can’t claim tax relief if you choose to work from home.
How much tax relief can I claim for working from home?
From 6 April 2020, taxpayers were entitled to claim £6 a week. This amount is the same regardless of whether you are required to work from home on a full or part time basis. The effect on your tax liability can be illustrated for the tax year ended 5 April 2021 as follows:
|Annual Tax Relief||Basic Rate Taxpayer @ 20%||Higher Rate Taxpayer @ 40%||Additional Rate Taxpayer @ 45%|
*Weekly rate was £4 for prior tax years.
**Reduction in tax may vary depending on individual circumstances.
It’s possible to claim the precise amount of extra costs incurred above the weekly amount. However, to do this, you’ll need to maintain evidence of the increase (calculations and receipts). The flat rate doesn’t require this level of attention.
For example, if you calculated your additional annual expenditure was £500, this would equate to a £100 repayment / relief for a basic rate taxpayer. As a result, this is an additional £37.60 compared to the fixed rate relief. However, the effort to work this out may not outweigh the tax saving and you may therefore prefer to claim the flat rate relief.
How can I claim tax relief for working from home
If you’re registered for Self-Assessment and submit an annual tax return, the relief can be claimed through the Employment pages of the return.
If you’re not required to submit an annual tax return, the relief can be claimed through your online government gateway account. This account takes around 10 minutes to create if you don’t have one already. Once claimed, your PAYE coding notice will be updated and will result in less tax being deducted going forward.
Please see the following for more detail, including a direct link to be able to make the claim. The link also goes on to additional reliefs, such as a uniform allowance, and you may therefore be entitled to additional unclaimed relief – https://www.gov.uk/tax-relief-for-employees/working-at-home.