Employees, required by their employers to work from home (WFH), have been able to claim tax relief long before the pandemic hit. The relief is designed to cover the additional costs of WFH, such as paying for heating, lighting and business calls.
In theory, a claim can be made for the actual extra outlay incurred if those costs are supported by appropriate records. In practice, the alternative of claiming a flat weekly amount set by HMRC is simpler and more widely used.
Until April 2020, that flat sum was £4 a week. But, since the start of the 2020/21 tax year, it increased to £6 a week. If you are a basic rate taxpayer, the relief is worth £1.20 a week. That amount doubles if you pay tax at higher rate (£2.44 in Scotland, where higher rate is 41%).
You might think such a small amount is hardly worth claiming, especially if you only WFH a few weeks in the year. Before Covid-19 arrived, many took that approach and WFH relief was largely confined to tax-experts territory. Unsurprisingly, the pandemic changed matters.
HMRC found itself facing a multitude of claims, many from employees who did not make self-assessment tax returns. In response it implemented two policies:
- In October 2020 it launched an online service, allowing most claims for those outside the self-assessment regime to be made with a few keystrokes; and
- HMRC said that for 2020/21 it would pay a full year’s tax relief (£62.40 for a basic rate taxpayer and £124.80/£127.92 for higher rate taxpayers) regardless of the number of WFH weeks in the tax year.
HMRC recently confirmed that the same process will apply for the current tax year. Last year over three million taxpayers registered a claim and so far over half a million have claimed for 2021/22. If you have not claimed for 2020/21 yet, you still can.
The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice.