Working From Home Tax Relief

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.

Working from home

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.

Statistics show that around one in seven working adults (14%) worked from home exclusively between 27 April and 8 May 2022.

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?

Who can claim working from home tax relief?

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:

• Your employer or job requires you to work from home
• You must work from home due to location or employment contract
• Your employer’s premises are not available or they do not have a physical office
• You have incurred extra costs due to working from home

This tax relief will no longer be eligible to you if:

• You have chosen to work from home
• Your employer has appropriate facilities but you opt not to use them
• Your employer pays you direct compensation for these WFH extra expenses

Additional costs to consider when working from home

The expenses you are eligible to claim tax relief on must be work-related and are listed by HM Revenue and Customs (HMRC) as:

• Business phone calls 
• Gas 
• Heating
• Electricity bills for your work area
• Internet costs and broadband bills
• Office equipment
• Insurance for working equipment 

This does not include costs that would remain the same irrespective of where you work, such as rent or council tax.

How much tax relief can you claim?

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: 

• Basic rate taxpayers: tax relief of 20% on £6, which is £1,20 per week/£62,40 per year
• Higher rate taxpayers: tax relief of 40% on £6, which is £2,40 per week/£124,80 per year
• Top rate taxpayers: tax relief of 45% on £6, which is £2,70 per week/£140,40 per year

The HMRC does accept backdated claims and allows you to claim this for up to four tax years. 

How do you claim working from home tax relief?

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:

• To check your eligibility by answering work-related questions
• Your personal ‘Government Gateway User ID’
• An employer’s details
• Your job title 
• The date which you started your remote work
• A valid UK passport/recent pay-slip
• Receipts of expenses 

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.

Will your tax code change if you work from home?

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. 

What has changed with the working from home tax relief?

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.

Working from home tax relief: examples

Example 1:

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.

Example 2: 

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. 

Working from home tax relief – conclusion

Remote and hybrid working has certainly become a more popular option since the pandemic, as seen in this statistic:

• In 2020, 35.9% of employed individuals worked remotely, which was a 9.4% increase from the previous tax year. 

You can find more working from home tax relief statistics here:

https://www.ons.gov.uk/employmentandlabourmarket

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!