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Want to know if you qualify for working from home tax relief?
So, you’ve got your professionally written CV, nailed your interview and landed your dream job!
Then you realise that like many people, you’ll be working from home and wonder what exactly this means for your taxable income.
This blog will provide insight into the rules and regulations surrounding tax relief for individuals working from home in the UK.
COVID-19 has disrupted many aspects of life, including the way we work. As a result of this pandemic, working from home or ‘remote work’ has gained popularity.
Although this new style of working has been a necessary transition, it has resulted in additional household costs and expenses.
Due to these extra costs, the UK government has introduced a tax relief for those working from home.
Allowing people to claim tax relief is also urging employees to work more efficiently from home, because who actually likes to pay tax?
Working from home tax relief is available for many people who have been encouraged by their employers to work remotely.
To be able to claim tax relief, you must meet certain requirements. This tax relief does have limitations and will only apply to you if:
This tax relief will no longer be eligible to you if:
The expenses you are eligible to claim tax relief on must be work-related and are listed by HM Revenue and Customs (HMRC) as:
This does not include costs that would remain the same irrespective of where you work, such as rent or council tax.
Up until the 6th of April 2020 the rate was £4 a week, whereafter it increased to £6 a week.
You can also choose to either claim the actual amount of money that has been spent or you can claim based on an agreed fixed amount or ‘flat-rate’.
Additionally, the amount of tax relief you qualify for depends on your income tax rate, with a basic rate taxpayer receiving the least tax relief. For example:
The HMRC does accept backdated claims and allows you to claim this for up to four tax years.
Firstly, you can check whether you qualify for this tax relief by visiting https://gov.uk/ and completing the ‘self assessment tax return’ for the relevant tax year. You will need:
HMRC will supply you with a tax refund if you meet the requirements and claim working from home tax relief for previous years. This is typically issued by way of cheque.
However, you cannot receive the tax refund if you have been getting tax relief directly from your employer.
Your tax code will change if you receive the working from home tax rebate.
The most predominant tax code for the 2022/23 tax year is 1275L and you can locate this code on your paycheck.
In other words this code is representative of your personal tax allowance, meaning you can earn £12,750 per year, tax-free.
It is beneficial to check your PAYE tax code regularly to avoid additional tax or a surprise tax bill come end of year.
For any queries or issues related to this tax rebate, contact HMRC for more information: https://www.gov.uk/log-in-register-hmrc-online-services.
Since we are no longer in the eye of the COVID-19 storm, the rules state you may only claim tax relief if you provide necessary evidence.
If you are no longer eligible for this tax rebate but didn’t claim when you were, you may find success with backdated claims for previous tax years.
Brian resides in Scotland and is the area sales manager for his company. The company’s closest office is in Newcastle, England. Due to the absence of any nearby office facilities, Brian must work from his home in Scotland. He turns one of his rooms into an office, so he can get his administrative work done. As this falls under his substantive duties, he is therefore entitled to working from home tax relief for the additional costs he encounters.
Kate works at a company that is becoming rapidly more successful and is therefore expanding. The premises can no longer accommodate the number of employees. The company relocates to a larger facility in a neighbouring town. Kate however chooses not to relocate and rather works from home. As this is a personal choice and not an employer requirement, Kate is no longer eligible to claim tax relief.
You can find more helpful examples in the Employment Income Manual of the HMRC internal manual.
Remote and hybrid working has certainly become a more popular option since the pandemic, as seen in this statistic:
You can find more working from home tax relief statistics here:
Although this style of working is looking to become the norm, making the transition to working from home can be quite an adjustment.
Be aware of having to pay higher costs related to working from home and know what you can do to combat this.
In conclusion, we hope this blog has helped equip you with useful insight into home allowance and how to claim tax relief that you may be entitled to.
So, complete your self-assessment now to claim your tax relief!