The COVID-19 pandemic dramatically transformed the way we work, leading to a surge in remote work arrangements.
In response to these changes, the UK Government introduced the working from home allowance to assist employees with some of the additional expenses incurred while working remotely.
In this guide, we examine how the working from home allowance has changed and what you can claim for the tax year 2022/2023.
When was the working from home allowance introduced?
The working from home allowance was introduced on April 6th 2020. It was initially implemented as a temporary measure to address the immediate challenges brought about by the pandemic.
The working from home allowance enabled eligible employees to claim tax relief on expenses directly associated with working from home. This included costs such as utility bills, internet usage, and equipment purchases necessary for carrying out work duties from a home office.
Due to the prolonged impact of COVID-19 on work arrangements, the working from home allowance has been continued, but with some key changes.
The working from home allowance is now known as working from home tax relief and there are different eligibility criteria.
Who can claim working from home tax relief?
You can claim tax relief if you have to work from home, for example because:
- your job requires you to live far away from your office
- your employer does not have an office
Who cannot claim working from home tax relief?
You cannot claim tax relief if you choose to work from home. This includes if:
- your employment contract lets you work from home some of the time
- you work from home because of coronavirus (COVID-19)
- your employer has an office, but you cannot go there sometimes because it’s full
It is crucial to note that the working from home allowance is available to employees and not self-employed individuals or company directors (see the gov.uk website for more guidance on claiming expenses when self-employed).
How much can I claim for working from home?
The amount you can claim depends on your circumstances. Here are the two options for claiming tax relief:
- You can claim a flat rate of £6 per week without needing to provide evidence of your additional costs. This is a simplified method that does not require you to keep receipts or bills.
- If your additional expenses exceed the weekly amount, you can claim tax relief on the exact amount of those costs. However, you will need to provide evidence such as receipts, bills, or contracts to support your claim.
The amount of tax relief you receive will be based on the tax rate you pay.
If you pay tax at the:
- Basic rate of 20% and claim tax relief on £6 per week, you would receive £1.20 per week in tax relief (20% of £6).
- Higher tax rate of 40%, your savings will amount to £2.40 per week.
- Additional tax rate of 45%, your savings will amount to £2.70 per week.
It’s important to note that you can make a claim for the current tax year and up to the previous four tax years.
This allows you to potentially recoup tax relief for eligible expenses incurred in the past.
What expenses should my employer pay if I work from home?
If you are required to work from home, your employer may be responsible for reimbursing certain expenses.
These expenses are directly attributable to your work activities and typically include additional electricity and heating for your work area and business phone calls.
You cannot claim for internet or rent which are used both personally and privately.
It is advisable to consult your employer or refer to your employment contract to gain a clear understanding of the specific reimbursement policies in place.
How does working from home tax relief get paid?
The working from home tax relief is typically paid through a change to your tax code, which adjusts the amount of tax you pay.
Once your claim is approved, HM Revenue and Customs (HMRC) will update your tax code to reflect the tax relief you are entitled to.
As a result, you will pay less tax throughout the year, effectively receiving tax relief in your monthly pay.
Will working from home tax relief continue?
While it is impossible to predict the future with certainty, it is likely that working from home tax relief will continue in some form.
The COVID-19 pandemic has significantly altered work dynamics, and remote work arrangements have become more prevalent.
As such, the government may continue to recognise the need for tax relief to support employees working from home.
Conclusion
The working from home allowance is now known as working from home tax relief and can be claimed by eligible employees for the 2022/2023 tax year.
By understanding the criteria, calculation methods, and reimbursement policies, you can make the most of this allowance and alleviate some of the financial burdens associated with working from home.
Stay informed about the official guidelines from HMRC and consult with your employer or a tax professional to ensure you maximise the benefits of the working from home allowance.
Get in touch
Whether you need guidance on eligible expenses, calculation methods, or compliance with HMRC guidelines, we have the knowledge and expertise to support you.
Contact us today at 01865 379272 or fill out our contact form to schedule a consultation.
