Working from home for a popular tax break that gave many people’s finances a small boost during the pandemic has become harder to claim, and most employees will no longer be eligible.
With millions of people back in the office for at least part of the week, experts say you can now claim tax relief for working from home only if you meet strict conditions.
Some commentators are urging employees to check their PAYE tax codes, as if HM Revenue and Customs have added relief when you are no longer eligible you could end up with a surprise tax bill.
But one bit of good news is that if you were required to work from home but didn’t get round to claiming, it’s not too late. You can still claim for past years.
Tax relief linked to working from home predates the pandemic – it was introduced almost 20 years ago. However, in 2020 the government relaxed the rules, which meant virtually millions of people were forced to work from home during lockdowns to claim tax relief worth up to £ 125 a year.
In autumn 2020, HMRC launched an online portal for employees to make claims without having to provide receipts or do complicated calculations. And, to make things even easier, eligible workers could claim a full year’s entitlement even if they had to work from home for only one day during the tax year.
Perhaps unsurprisingly, this has been a popular tax break. Millions of people have successfully accepted it, sending the bill for the relief of about £ 2m a year before the Covid crisis over £ 500m over the two years of pandemic, according to reports. Some people were probably expecting they could just claim again.
The tax relief was offered to workers provided they were told by their employer rather than chose to work from home, and provided they did not receive home expenses payments from their company.
Once the application was approved, the portal adjusted the individual’s tax code, and they received the tax relief directly through their salary.
Your claim was based on the assumption that you incurred costs of £ 6 a week while working from home, so you got back the tax that you would have paid on that sum.
For basic-rate taxpayers the relief was worth 20% of the £ 6: £ 1.20 a week. Higher-rate taxpayers could claim 40% of the £ 6: £ 2.40 a week.
Over the course of the year, this meant people could reduce the tax they paid by £ 62.40 or £ 124.80 respectively.
The relief relates to home costs such as gas and electricity, metered water and business phone calls, though under the rules, you cannot claim for the entire bill, “just the part that relates to your work”.
Tax experts say the rules have not changed. Covid restrictions instead of gradual easing mean that most people have situations. As a result, HMRC has updated the guidance to make it clearer that you cannot claim relief if there is an element of choice in your working home.
Joanne Walker, a technical officer at the Low Incomes Tax Reform Group, says the rules were relaxed for employees in 2020-21 and 2021-22, but as of April this year, HMRC was following the following rules again.
She says that, as before Covid, people can now only claim tax relief if they meet the conditions set out in HMRC’s Employment Income Manual 32760. These rules are quite strict: for example, it must generally be the case that no facilities are doing Your work is available to you on your company’s premises.
Robert Salter, a client tax director at Accountants Blick Rothenberg, said recently that employees should check their tax codes to see if HMRC has included relief. “If this is the case, unless they are still eligible for the relief in 2022-23, they should contact HMRC to get the coding of the notice corrected. Otherwise they will have to pay additional taxes at the end of the tax year, “he said.
He added that the work-from-home relief was available from 6 April 2022 onwards only if your employer required you to work from home – for example, to stop the spread of Covid or because your job was “relocated” and was now Contractually regarded 100% as a home-working role.
“If, for example, your employer simply allows staff to work flexibly – that is, being in the office or working from home as it suits each individual – the home office relief ceases to be available for the 2022-23 tax year.”