Working from home expenses for employees: what tax-relief you can claim & how…
Another week working from home…
Running my own small business, working from home is actually the norm for me and I must admit I love it! Occasionally it is hard to separate home from work, but I have got better at this over time & hopefully will continue to...
I love working with the view out across my garden. I love my coffee machine! Most importantly I really value being able to respond to those emergency phone calls from, or about my kids, just needing their mum and there have been at least 2 already this half-term!
Back to the accounting…
The sudden need for social distancing this year has enforced home-working on thousands of people up & down the country and with it comes some additional costs such as heating, metered water bills, home contents insurance, business phone calls...
HMRC has always allowed employers to pay employees an additional amount tax-free to cover such additional costs if they have had to work from home. Employees who have not received the expenses payment directly from their employer can apply to receive the tax relief from HMRC. However, until this year this did not apply to many people so they have been unaware they can claim.
Of course, being self-employed none of this applies for me, there are a completely different set of rules for that...!
What can you claim?
Instead of trying to apportion costs and keep hold of all the paperwork for your household bills, HMRC allow you to claim a simple flat rate per week for these additional costs.
You cannot include costs that would stay the same whether you were working at home or in an office, such as mortgage payments, rent or council tax.
For the current tax year, starting from 6 April 2020 employees are eligible to £6 per week tax-free to cover additional costs for home-working. This has increased from £4 per week in 2019/20.
If an employed worker pays the 20% basic rate of tax and claims tax relief on £6 a week, they would receive £1.20 a week in tax relief (20% of £6 a week) towards the cost of their household bills.
Higher rate taxpayers would therefore receive £2.40 a week (40% of £6 a week).
Over the course of the year, this could mean taxpayers can reduce the tax they pay by £62.40 or £124.80 respectively.
Are you eligible to claim?
The tax relief is available for employees whose employer requires them to work at home. You cannot claim tax relief if you choose to work from home.
You can claim the full allowance even if you are only working from home part-time.
You can claim the full allowance even if others are going into work.
You can claim the full allowance even if you are only need to work at home for part of the week and are in the office for the rest of the week.
You do not need to provide evidence to show your bills have increased unless you are applying for tax relief on costs above the £6 per week flat rate.
How to claim
1. Claim directly through gov.uk
HMRC have recognised that this year there are so many more people eligible to claim and they want to make the process easier for people to get the money they are entitled to.
On 1st October 2020 HMRC launched a new online portal to simplify the process of claiming this tax-relief for employed workers who have been told to work from home by their employer to help stop the spread of coronavirus.
Check if you can claim
Submitting a claim via the online portal just takes a few minutes. You will need a Government Gateway user ID and password to make a claim.
You can create a user ID if you do not already have one, which usually takes about 10 minutes and works best if you have:
your National Insurance number
a recent payslip or P60 or a valid UK passport
Follow the link below and select 'Create sign in details'.
Create Government Gateway ID
Once your expenses application has been submitted via the online portal and approved, the individual’s tax code for the 2020/21 tax year will be adjusted. The employee will then receive the tax relief directly through their salary and will continue to receive the adjustment until March 2021.
HMRC have already received 54,800 claims submitted through the new portal in the first 11 days from it’s launch!
2. Claim on your self-assessment form. The tax-relief will be applied as a lump sum against your 2020/21 tax bill.
3. Postal P87 form
In the interests of providing full disclosure the link below is for the paper form, however I feel there is some irony providing a digital link for the paper form and if you can access that it is probably far quicker & easier to go with one of the digital options above!
'Amount paid by you'. Provided you've had increased costs, put a total amount that's equivalent to £6/wk for the period you've been working from home.
'Amount repaid to you by your employer'. If your employer hasn't paid you a working from home allowance or reimbursed your homeworking expenses, put £0.
Are there any other expenses you can claim?
There may be other expenses you are eligible to claim tax relief for as well…
Equipment e.g. a laptop, chair or mobile phone, where you need it to do your job and there’s no significant private use. https://www.gov.uk/tax-relief-for-employees/buying-other-equipment
Uniforms, work clothing and tools https://www.gov.uk/tax-relief-for-employees/uniforms-work-clothing-and-tools
Business mileage (not commuting) https://www.gov.uk/tax-relief-for-employees/vehicles-you-use-for-work
Professional fees & subscriptions https://www.gov.uk/tax-relief-for-employees/professional-fees-and-subscriptions
Travel & overnight expenses https://www.gov.uk/tax-relief-for-employees/travel-and-overnight-expenses