As a result of the coronavirus pandemic requiring many employees to work from home, HM Revenue & Customs (HMRC) relaxed the rules on claiming the working from home tax relief for the 2020/21 tax year. This meant that an employee could claim a full year’s entitlement provided they had been required to work from home at some point during the tax year.
Originally the relaxing of the rules was only to apply for the 2020/21 tax year but HMRC have confirmed they are accepting tax relief claims for the increased household cost of working from home due to coronavirus for the 2021/22 tax year as well.
It has long been the case that where employees are required to work from home, they are able to claim tax relief to reflect any additional costs they incur as a result. This can broadly be done in one of two ways. HMRC will allow a claim of £6 a week from 6 April 2020 (for previous tax years £4 a week) without the employee having to provide evidence of the extra costs or alternatively the exact amount of additional costs can be claimed with supporting evidence such as receipts, bills or contracts. For the purpose of this bulletin we are focussing on the first of these claims.
A claim for tax relief would normally be made either through the personal tax account or through self-assessment if the taxpayer completed tax returns. However HMRC made this process easier in October 2020 by launching a new microservice which allowed employees to make a claim specifically for working from home and obtain the tax relief quickly and easily. Once the claim was submitted, an adjustment was made to the employee’s PAYE tax code for the current year and relief is given throughout the remaining months.
Following the extension into the 2021/22 tax year of the relaxing of the rules on claiming the working from home allowance this online microservice can again be used by employees to make a claim for the tax relief in the same way as for 2020/21. The relief must be claimed again for 2021/22 even if an employee made the claim using the service in 2020/21.
The microservice does require a taxpayer to set-up a government gateway ID which takes roughly 10 minutes to do if they have not already done so. Once logged in, there are three simple questions to confirm eligibility for the relief before submitting the claim. HMRC do not require any records to be kept for the periods worked at home during 2021/22. It should be noted that those employees who are required to submit a self assessment tax year are not eligible to use this microservice and instead must claim the tax relief for working from home on their self assessment tax return.
As for 2020/21, HMRC have confirmed that for the 2021/22 tax year only, they are relaxing the rules on counting the number of weeks worked at home. If an employee has been required to work from home at some point during the tax year, HMRC will allow a full year’s entitlement to the tax relief. This means that an employee is able to claim tax relief on £312 (52 weeks at £6) at their marginal rate (20/40/45%) if they have been required to work at home for at least one day during the current tax year.
This results in a tax saving of up to £62.40 for basic rate taxpayers.
If employees were required to work from home last year but did not claim for the tax relief it is still possible to make a claim for 2020/21 as HMRC will accept backdated claims for up to 4 years. Employees making a backdated claim will receive a lump sum payment for any successful claims rather than having their tax code altered for 2021/22.
As last year, agents will not be able to use the new service to apply for the relief on a taxpayer’s behalf. The microservice can be accessed from the HMRC website via the following link – https://www.gov.uk/tax-relief-for-employees/working-at-home.
If you would like more information or if you require our assistance in making a claim for tax relief as a result of being required to work from home, please speak to your usual contact at the firm.
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Our staff have returned to office based working on a rota basis, each attending two days a week, whilst continuing to work from home at other times. They can still be contacted in the usual way either via email or by calling the office number where reception will divert your call to the appropriate staff member.
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