Lockdown lifting: How to claim money back when working from home

As people face potentially another six months of working from home, how can you keep costs down?

Sophie Gallagher@scfgallagher
Tuesday 24 November 2020 10:44

On 23 November, Boris Johnson announced that although the nationwide lockdown in England would be ending on 2 December, the country would be readopting the tiered system of regional lockdowns first used in October.

This means that even in the lowest (or most relaxed tier) - tier 1 - people should continue to work from home where possible rather than going into the office, as had been promoted over the summer with campaigns encouraging workers to return.

On Monday the prime minister said that this instruction could last till March/April as rates of Covid-19 persist and the UK combats the dual winter problems of flu and coronavirus.

For some people this might be a welcome relief that they don’t have to commute, but for others it might raise concerns about higher costs of being at home 24/7 during the winter months; the increase in electricity and heating bills that will entail. 

If these measures do last till spring that would be 12 months of working from home for many people forced out of workplaces on 23 March 2020.

So is there a way of making this time more cost effective? As well as not shelling out for public transport or take away lunches, being at home could bring tax benefits too.

Can I get money to cover my expenses?

HM Revenue & Customs (HMRC) says you might be able to claim for tax relief while working from home if you use your own money for things that you must buy for your job and, crucially, you only use these things for work purposes.

It says: “This includes the cost of things such as heating and lighting the room you work in, or the cost of business telephone calls.” But you cannot claim for things that you use for both private and business use, for example, rent or broadband access.

You have to keep a record of what you are spending to claim this back at a later date.

If you can’t be bothered to keep records of everything (it will be quite labour intensive trying to prove what is for work and what is personal) then you can opt for a flat rate of £6 per week reimbursement instead. 

From 6 April 2020, HMRC says you can claim a base rate up to £6 a week (£26 a month) of additional costs without having to provide any paperwork.

That doesn't mean you save £6 a week - you only save the tax you would have paid on that. So it works out as £1.20 a week (£62 a year) for a basic rate taxpayer, or £2.40 a week (£104 a year) for someone paying the higher rate of tax.

Which? says: “This is worth it for ease, but perhaps not worth it if you’re certain you’re having to spend more than £6 a week to work from home.”

Of course you can go ahead and claim more than £6 if your costs are higher but it will take more work and diligence in keeping evidence.

How do you claim?

Money Saving Expert says there are two ways you can claim the flat rate. The first is that your employer can pay you £6 a week extra tax-free. “But right now – with many firms struggling – asking may be bad timing,” it says.

Instead you can claim the £6 per week as a deduction on your taxable income. “If your employer won't pay expenses for your extra costs due to necessary working from home, but you have them, then you can ask for the amount to be deducted from your taxable income,” it says.

If you normally do a self-assessment form, you can claim when you submit that. If you do not, it will involve making a claim online through the Government Gateway - or with a P87 postal form.

You claim retrospectively on expenses you have already incurred so if you can wait until the start of next year it might be easier to do them in one sitting rather than in many instalments. Once you had applied your tax code will be adjusted so you pay less tax over the year, rather than getting a lump sum back in your bank account.

You can also claim on anything prior to the pandemic but be warned the previous tax years the rate is £4 a week (£18 a month). So you will get less than for this financial year.

Are there exemptions that stop you applying?

The government website says you do not qualify for relief if you’ve agreed with your employer “to work at home voluntarily or you choose to work at home”but HMRC confirmed to The Independent the pandemic does not come under this qualification.

“Working from home during the pandemic doesn't count as ‘voluntary’. If people are working from home because of Covid-19 then they can claim,” said a spokesperson.

You cannot claim a tax relief if your employer either gives you all the money back you have spent, or you just want an alternative to something your employer has provided. For example. They have given you a laptop but you want a different type or model.

You must also have paid tax in the year to qualify for relief. This is because you’ll get tax relief based on what you’ve spent and the rate at which you pay tax. For example, if you spent £60 and pay 20 per cent tax rate, you can claim £12 back from the government.

You also qualify even if you only work at home part time.

When The Independent tried to start a claim the website asked the following questions:

  • Are you claiming for yourself or someone else?
  • Are you claiming for after April 2016?
  • Did you pay tax in the years you are claiming for?
  • Do you complete self assessment forms?
  • Are you claiming expenses of more than £2,500 in a single tax year?
  • Has your employer paid back your expenses?
  • Are you claiming for more than five different jobs?

It then confirmed “you are eligible to claim these job expenses online”.

The next step is to create a Government Gateway user ID and password. You can create a user ID if you do not already have one. It usually takes about 10 minutes. 

It works best if you have your National Insurance number and a recent payslip or P60 or a valid UK passport to hand.

You can find the application here.

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