With more of us working from home, there is good news from HMRC that employees can now make a claim for tax relief to cover some of their costs while they are working from home.
The previous rule for employees was that there had to be a home working arrangement with their employer, under which they were required to work from home on a regular basis to be paid £6 a week tax free (£4 a week up to 5 April 2020).
This rule has now been relaxed as a result of COVID-19 so that such arrangements are not currently required and employees can also claim tax relief directly from HMRC where their employer does not make the payments.
£312 a year tax free is equivalent to £538 gross for a higher rate taxpayer. The payments are tax deductible for the employer and not liable to national insurance contributions.
Where the employer does not make the payments to the employee, there is a new claims portal on the HMRC website so that the employee who is working from home can claim to deduct £312 from their employment income. This would generate a £124.80 tax refund for a higher rate taxpayer or £62.40 if basic rate.
There is a similar tax break for the self employed which provides a deduction from profits of up to £26 a month.
Find out more about claiming tax relief on work related expenses.
Access the online portal for working from home expenses.
Employees do not need to provide evidence to show their bills have increased unless they are applying for tax relief on costs above the £6 per week flat rate, in which evidence of the increased costs may be required.
Employees will receive the tax relief that corresponds with the Income Tax rate that they pay. For example, it will differ in Scotland.
Employees may be able to claim tax relief on the cost of:
- expenses for working from home
- repairing or replacing small tools needed to do their job (for example, scissors or an electric drill)
- cleaning, repairing or replacing specialist clothing (for example, a branded uniform or safety boots)
- business mileage (not commuting)
- travel and overnight expenses
- professional fees and subscriptions