Have you claimed your ‘working from home’ tax relief?

Well, that’s the central heating on again, now that the clocks have gone back for the winter. This year, along with millions of other households, it will need to stay on more than usual due to us working from home. Fortunately, there is a little bit of financial help available for employees.

Her Majesty’s Revenue & Customs (HMRC) allow some tax relief against additional household costs if you have to work from home. But it doesn’t just happen – you need to take action and claim it. So, if you’ve been instructed to work from home at any point this year due to coronavirus, set aside about 20 minutes and follow these steps to reduce your income tax bill during the pandemic.

What is it?

First of all, it’s not a lump sum of money that you can spend in a oner. Think of it as an increase to your net pay. If part of your salary needs to go towards additional gas, electricity or even equipment that you have bought due to staying at home for work, HMRC will not tax you on that part of your income. So, it has the effect of increasing your take-home pay.

There are two ways to make a claim. The more complicated option is to calculate the actual costs incurred and provide evidence of this to HMRC. This allows you to claim tax relief for higher expenses, but there’s a fair bit of detail involved – it’s not for today’s blog, but you can find more details online.

For most people, the easier option will be best. This does not require any evidence or record keeping and if you claim for the whole of this tax year, it’s worth £62.40 if you pay basic rate tax at 20% or £124.80 if you pay higher rate tax at 40%. This is based on tax relief on a maximum claim of £6 of your salary per week.

Who can claim?

This is not for people who choose to work from home, but if you’ve been told to work from home because of coronavirus, you should be eligible, providing your employer has not already paid an additional allowance to you.

Employers may choose to pay an additional, tax-free amount of £6 per week to workers being asked to work from home, but in the current economic environment, it’s likely that most will not.

So if you’ve been told to work from home and you’re not getting paid any additional allowance for this, read on.

How to claim

If you complete an annual tax return via self-assessment, you’ll be able to claim this allowance when you complete your 2020/2021 tax return after 5th April 2021. Just remember to declare that you’ve been using your home for work purposes and follow the questions.

If you’re fortunate enough not to have the joys of self-assessment, you can easily submit a claim here:

https://www.gov.uk/tax-relief-for-employees

To complete the process online, you’ll need a Government Gateway user ID. If you don’t have one already, don’t let that put you off. It only takes about 10 minutes to register and it helps to have your National Insurance number and a passport, payslip or P60 handy.

You need to enter the date you started working from home and this can go as far back as 23rd March 2020, when lockdown started.

When completing the question about how much you want to claim, the “Amount paid by you” is a maximum of £312 without needing any evidence. That equates to the £6 per week.

Upon a successful claim, HMRC will adjust your tax code, so within a couple of months, you should notice a slight increase in your take-home pay. About £5 per month for basic rate taxpayers and £10 for higher rate taxpayers.

If you would like more detailed instructions on this, there’s an excellent article on MoneySavingExpert.com that takes you through the process step by step.

Summary

This won’t bring you riches, but for around 20 minutes of effort, it could help to pay for any increase in your household bills over the winter.

I’m off to increase the timer settings on the central heating now.

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