How to claim money back when working from home

The government has encouraged people to claim tax relief ahead of reports that the scheme may close

Sophie Gallagher,Kate Ng
Friday 28 January 2022 15:41
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The government may have lifted its latest work from home order as of 19 January, but with many people and businesses switching to hybrid working as the pandemic continues, working from home is still popular among those who can.

Figures from the Office for National Statistics show that one in four adults reported working from home in the seven days to 16 January 2022, equivalent to 13.4 million people.

Throughout 2020 and 2021, people who worked from home were able to claim tax relief to ease the financial burden of working from home, particularly during the winter months when electricity and heating bills were higher.

The tax relief scheme, which has been in place since 2003, allows anyone who works from home for even a single day to claim a yearly sum of up to £125. It saw a massive surge in the number of claimants when the coronavirus pandemic hit.

But according to The Telegraph, HM Revenue and Customs (HMRC) are urgently reviewing the scheme as it has reportedly cost the Treasury nearly £500 million since March 2020, when the first national lockdown was imposed.

The amount of money workers could claim was raised from £4 a week to £6 during the pandemic and they no longer had to prove they worked from home regularly to be eligible. However, these updates were temporary and originally set to end in April 2021, before being extended for a further 12 months.

A spokesperson for the Treasury told The Independent: “The Home Working deduction has been in place since 2003 to support employees with the additional household cost of working from home. Since then it has formed part of a wider support package for individuals during the pandemic.

“There are no pans to reform this deduction but we keep all taxes under review and closely monitor their value for money.”

Earlier this week, the government’s official Twitter account encouraged home workers to claim tax relief for additional household costs. If you are working from home, either for all or part of the week, here is everything you need to know about making the most of the tax relief scheme now:

Can I get money to cover my expenses?

HM Revenue & Customs (HMRC) says you may 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. 

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.

Alternatively, 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.

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 in November 2020 that 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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