Don't forget to claim working from home tax relief

Following the start of the coronavirus pandemic in March 2020, homeworking became the new ‘norm’ for millions of employees and, as a result, the government made temporary changes to the tax reliefs available to employees working from home in the 2020/21 and 2021/22 tax years.

Working from home tax relief is generally available when an employee is mandated to work from home by their employer. Such employees can claim a proportion of ‘actual’ expenses (additional heating and light, metered water and business telephone calls) intended to cover the additional household costs incurred due to working from home. However, because such sums may be complicated to calculate, as an alternative, employees can claim £6 per week (£312 for the year) working from home relief without having to justify the figure. There is no requirement to reduce this payment should the employee work part of the week at home and part of the week at the employer’s premises or other workplace, provided the employee was required to work at home at least part of the week. This relief can be claimed where the employer does not reimburse expenses. The rules were relaxed during 2020/21 and 2021/22 to cover cases where employees were working from home due to coronavirus, either because their workplace was closed, or because they were following government advice to self-isolate.

Although some relaxations have been extended to the 2022/23 tax year, this is only the case when the government, rather than the employer, requires employees to work from home due to the coronavirus pandemic.

Where available, relief is given at the employee’s marginal tax rate, giving a basic rate (20%) taxpayer a tax saving of £62.40 per year. Higher and additional rate taxpayers, (and intermediate, higher and top rate taxpayers in Scotland) benefit from larger savings.

If an employee who qualifies for working from home tax relief believes they have higher actual additional relevant costs, they can claim more, but need evidence of their increased costs and must be able to demonstrate that these extra costs arose specifically due to working from home. However, this would be a much more laborious process than claiming the £6 allowance that is otherwise available.

In order to obtain tax relief, those that complete self-assessment tax returns can simply claim £312 as a deductible expense on the ‘employment’ pages of their return. Those who are not within self-assessment can apply for relief on the HMRC website and receive it through an adjustment to their PAYE code each year. Any adjustment claimed for 2021/22 should not have carried into 2022/23 PAYE codes automatically, but it is worth checking PAYE codes to ensure this is the case, as if the allowance has been incorrectly carried forward, the taxpayer may have a tax liability.

For those taxpayers that have filed their tax returns for 2020/21 and 2021/22 and are now realising that they could have qualified for the relief in those years but did not make a claim, a backdated claim can be made online. This can be done on HMRC’s website until 5 April 2025 for the 2020/21 tax year and until 5 April 2026 for 2021/22. No coronavirus easements were made for the self-employed in respect of working from home expenses, but a claim using ‘actual’ costs or using the simplified expenses regime for self-employed taxpayers could be available throughout this period.

It is likely that many employee taxpayers were aware of their entitlement to claim relief in relation to their 2020/21 tax returns, as working from home and the lockdowns were fresh in the memory, and the easements to the qualifying conditions widely publicised. However, it is possible that claims for 2021/22 may have been forgotten and it may therefore be appropriate to consider a back dated claim through the HMRC website.