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Since the pandemic struck, working from home, previously a relatively rare concept, became classed as ‘the new normal.’ Given the shift in working caused by the COVID-19 pandemic, it has meant a higher percentage of the UK workforce now spends at least part of their working week at home. This in turn has dramatically increased the number of taxpayers claiming against the Home Working Allowance.
This historically has been available to those officially having a “home working” contract but with the easements given due to the pandemic, it has given genuine value to individuals forced to work from home and has supported the higher living costs of spending more time at home as created.
HMRC has revealed that since April, almost 800,000 employees who have been working from home during the pandemic have claimed tax relief on household related costs.
Depending on what your tax rate is, the saving is worth up to £125 per year for each employee, and eligible workers can claim the full year’s entitlement if they have been told to work from home by their employer, even if it has been for one day during the tax year.
You can either claim tax relief on:
- £6 a week from 6 April 2020 (for previous tax years the rate is £4 a week) – you will not need to keep evidence of your extra costs
- the exact amount of extra costs you’ve incurred above the weekly amount – you will need evidence such as receipts, bills or contracts
You will get tax relief based on the rate at which you pay tax.
For example, if you pay the 20 per cent basic rate of tax and claim tax relief on £6 a week you would get £1.20 per week in tax relief (20 per cent of £6).
Employees who have either returned to working in an office since early April or are preparing for their return can still claim the working from home tax relief and benefit from the full year’s relief for the 2021 to 2022 tax year, as it isn’t on a pro-rata basis and depending on an individual’s circumstances, is either claimed through self-assessment or the on-line portal which can be found here.
Employees can apply directly themselves and receive the full tax relief that is due. Once their application has been approved, their tax code will be automatically adjusted for the 2021 to 2022 tax year, receiving the tax relief directly through their salary.
To find out how home working may affect your employees and payroll processes, please contact us.