10 May 2023
The 2022/23 tax year has ended, and many employees accustomed to HMRC relief for working from home may be in for a shock when they come to fill in their tax return.
In the 2020/21 and 2021/22 tax years, employees working from home due to the pandemic could claim tax relief on £6 per week towards the costs of homeworking – worth £62.40 a year for basic rate taxpayers and £124.80 for higher rate taxpayers.
In the 2022/23 tax year, that tax relief is no longer available and along with the rise in bills, it will leave many workers considerably worse off.
In 2023, it has become obvious that the pandemic has permanently changed the way many of us work. So-called ‘hybrid working’ is now the norm, with many employees in the office only two or three days a week. Homeworking and hybrid working has become a key requirement for jobseekers, and employers have had to adapt.
Many employers have accordingly reduced their office space, leasing smaller premises with ‘hotdesking’ policies meaning they have less desks than employees. This makes commercial sense, but it leaves employees unable to come into the office on a full-time basis. Despite this, for 2022/23, HMRC has explicitly said that employees cannot claim tax relief on the £6 per week if:
- their employer has an office, but they cannot go there because it’s full, or
- they work from home due to coronavirus.
In combination, the real costs of working from home have significantly increased. Gas prices are up 129.4% in the year to March 2023, according to the Office for National Statistics, and around half of British adults are worried about the cost of energy. Actual work-related costs incurred can be claimed, instead of the £6 per week deduction, if a tax return is filed. However, it is worth noting that such a claim, which cannot include costs with a private use element, may be time-consuming and onerous to calculate.
Employees working from home are genuinely decreasing real estate and energy costs for their employers – at their own expense.
In the Spring Budget for 2023, Jeremy Hunt pledged to work with employers to demonstrate the benefits of offering flexible working, and the government will launch a call for evidence in summer 2023. In this context, explicitly reducing the tax relief available to employees, already likely to be much lower than actual costs, seems contradictory to this objective and out of kilter.
Given the chancellor’s stated objective of encouraging the ‘economically inactive’ back into the workplace, it’s vital that he reflects on the current working environment and whether the tax rules for hybrid-workers are fit for purpose. Not only are employees facing a cost-of-living crisis but this may be compounded for many with the cost of working. We look forward to seeing the call for evidence later this year.