Working from home: HMRC tax relief explained
Many of us had to shift gears and work from home at some point throughout the pandemic. In fact, the latest numbers show that 5.6 million people went from the office to their home office (or kitchen table) at some point during 2020. Surprisingly though, only 800,000 have so far made applications for the working from home tax relief.
At a rate of £6 per week, HMRC working from home allowance might not sound like much. But if you were required to work from home for even just one day during the lockdowns, you could be due for a nice chunk of change in the form of tax relief.
We get it – your employer and HMRC usually handle the tax codes, benefits and financial stuff. It’s normally out of your hands and this sounds like more effort than it’s worth.
But we’re here to show you just how simple and quick it is to make a claim if you’ve been working from home, and get the working from home tax relief that’s due.
What is HMRC working from home allowance?
Through the working from home allowance 2022/23, HMRC offers compensation, in the form of tax relief, for the costs associated with remote employment. You know, all the extra gas and electric bills associated with running a home office, for example.
Effectively, the government reimburses the cost in the form of a tax credit for working from home.
The money is taken off your current tax bill that’s paid every month, meaning that you’ll keep slightly more of your salary. But if you wait to claim until the end of the tax year, you may receive a straight-up refund in the form of a cheque.
Working from home tax relief backdated
Most of us were required (to put it lightly) to begin remote working in March 2020, which means we’re now onto the third year of possible claims. If you missed out on claiming the tax rebate working from home in previous tax years, don’t worry: HMRC allows you to backdate claims. Phew!
Applying for HMRC working from home tax relief 2021-22 and the year before that (since most of us became eligible for WFH tax relief in 2020) could mean you are eligible for up to £280 in total. And just in case you’ve been working from home prior to that, it's good to know that they allow backdating for up to four years.
As well as Covid-related changes to the working from home allowance, HMRC brought in other measures such as furlough through the job retention scheme. But this all ceased in October 2021. So, the work from home allowance is now one of the only measures still in place that you can make the most of.
Now that there is no longer a government requirement to work from home, like the lockdown, only a small percentage of the UK’s workforce is actually eligible to apply for tax relief in the 2022-23 tax year. But this doesn’t mean you should miss out on previous years.
Luckily, the deadline has not yet passed to make a backdated claim for working from home tax relief 2021. HMRC has confirmed that workers have until April 2025 to claim for the tax year ending in 2021, and 2026 for this current year.
How to claim the working from home tax relief 2022/23
To apply for working from home tax relief, you need to follow the steps on the government’s website. There are two different times to claim: at the end of the tax year or during the tax year.
Here’s how to claim working from home tax relief 2022/23:
- Check you are eligible by answering the questions on the government portal
- Create a government gateway ID. To do this, you’ll need your national insurance number, alongside one of the following: recent payslip, P60 or passport
- After signing in, select the date that you began working from home (note that you can put a date from a previous year and receive the tax relief together)
- Simply wait for your cheque to arrive from HMRC
Another important thing to note: HMRC allows you to claim tax relief on other expenses and extra costs too, such as business travel. But they do expect receipts and documentation. In order to apply, fill out a P87 working from home form.
Can I claim working from home tax relief 2022/23 tax year?
Short answer: Yes, but beware that the eligibility criteria has changed. Even if you were able to claim during 2021, there is no guarantee that you will qualify in 2022/23.
Who is eligible for tax relief?
The main purpose of regulation around this tax relief is to prevent double claims. This means that if your employer has already paid for or reimbursed the extra costs of working from home, applying for tax relief would be slightly cheeky on top.
Moreover, you cannot have chosen to work from home, it must be a requirement. For example, if you are required under government restrictions, or there are no facilities available for you to complete your work at the office.
This applies to those claiming working from home tax relief Scotland, and working from home tax relief Wales, along with those in Northern Ireland. Unfortunately, working from home tax relief Ireland is totally different since it is not part of the UK.
What can you claim the tax relief for?
As part of HMRC working from home scheme, the compensation can be claimed for extra household costs that have occurred as a result of your work. While this includes the electricity and gas bills associated with using your home as an office, tax relief also exists with regard to business phone calls, for example.
Remember that HMRC specifies that you cannot apply for expenses that affect your private life, even if there is a crossover. Unfortunately, this means no claiming for meal deals.
How much working from home tax relief to expect?
The amount of tax relief you can receive is proportionate to the tax you pay.
Basic rate taxpayers receive 20% of the £6 per week figure, which is £1.20. Across one year, this adds to £62.40.
Higher rate taxpayers also receive their equivalent tax bracket back in the form of tax relief, which is 40%. This is £2.40 per week or almost £125 per year. Finally, those who earn above £100,000 and pay an additional rate tax of 45%, are eligible for £2.70 per week, which leads to £140.40 per year.
What if it doesn’t cover the cost?
Due to the sheer number of claims processed over the past two years, it would be virtually impossible for HMRC to deliver tax relief on a case-by-case basis. This means that for most of us, £6 per week is a hard limit.
In this case, evidence like receipts and other documentation is required. While keeping track of all your paper receipts may feel outdated (not to mention bad for the environment), it’s what HMRC requires to process your transactions.
Give your company a friendly nudge
Usually, it’s the finance team at your organisation that handles employee expense claims, receipt reconciliation and reimbursements. But if this isn’t the first time that you’ve found yourself picking up the slack with expense claims, it might be time to nudge your company into the 21st century.
Never lose a receipt again
We know just how difficult it is to try and file away all of your receipts, let alone how time-consuming it is to organise them when it comes to making a claim. But why should that mean that you miss out on the tax relief that you are owed?
With Pleo’s receipt scanner, you’ll get a notification on your phone as soon as the transaction goes through the till. Simply scan your receipt there and then in order to lock it in and when you’re ready to make a claim, watch your organisational worries disappear.
And when your cheque comes in, go ahead and order that ergo chair you’ve had your eye on.
You might enjoy...
Small business cash flow top tips, techniques and tools – plus advice on managing cash flow from financial professionals.
Expense management for small businesses: we’re talking automated expense tracking vs. manual.
We’ve taken a look at some of the best finance tools out there, so you can get a jump start on saying goodbye to manual data entry for good....