Employees working from home due to the coronavirus pandemic can continue to claim tax relief on costs not reimbursed by their employer, but a new claim will need to be made for the 2021/22 tax year, HMRC has recently confirmed. Some detail on the working from home tax relief can be found below.
What is the working from home tax relief?
A flat rate of £6 per week or £26 per month can be paid tax free to employees to cover the increased costs of heat, light, phone calls and broadband usage due to home working through the coronavirus pandemic (the rate was £4 per week or £18 per month prior to 6 April 2020).
This expense can be paid to the employee by their employer without the submission of any records. Higher amounts can be claimed by agreement but must be supported by receipts or other evidence. In practice, most people find the flat rate allowance enough to cover these costs.
If employers choose not to make this £6 per week payment , the employee can make a claim for the additional tax allowance of the same amount themselves. HMRC changed its systems in 2020 so that employees only need to claim once to automatically claim the relief for ALL of this tax year.
This tax relief of £6 per week equates to a saving of £1.20 per week for a basic 20% rate taxpayer and £2.40 per week for a higher 40% rate taxpayer.
Claiming for the 2021/22 tax year
As mentioned above, HMRC has confirmed that employees are able to continue claiming the working from home tax relief for the entire 2021/22 tax year, however, a new claim must be submitted.
Employees can claim the relief if they are required to work from home and have additional expenses, even if…
– They are only working from home part-time
– Others from the same company are going into work
– Employees are only needed to work at home, say, one day out of five and were in the office for the rest of the week
To submit claims, employees can access HMRC’s dedicated working from home online service that will automatically apply the whole tax year’s relief via their tax code.
If you fill in a self-assessment form, you won’t be able to use the Government’s online service to apply for the tax relief, but you will be apply via your self-assessment form, whether this is completed online or via post.
Working from home claims for sole traders and partners
In line with the allowances available to employees who may be working from home, as mentioned above, there is a similar allowance available for self-employed individuals, including partners in a partnership. The allowance covers additional costs of running your household when you are working from home, covering costs such as water, heating and lighting, plus an apportionment of rent, mortgage interest, council tax, insurance etc. The claimant can decide whether to claim actual expenditure incurred or on a simplified flat-rate scheme.
The calculation for claiming the actual costs should factor in hours worked, length of time used, amount of space used etc. Care should also be taken when considering the use of a room exclusively for business, as this can affect future capital gains tax when the property is sold. Also, exclusive rights can cause issues with council tax i.e. raising the question whether business rates should be paid.
The simplified scheme depends on the hours worked from home during a calendar month which could depend based on sickness holidays etc.
The rates are as follows;
Hours worked in a calendar month Monthly deduction
25-50 £10
51-100 £18
101 or more £26
However, the flat rate scheme is not available if the partnership includes a limited company as one of its members.
Instead, claims can be administered in one of two ways for a partnership;
– Partners could submit expense claim forms for costs incurred and be reimbursed by the partnership. The cost would then be a deduction against profits within the partnership accounts.
– If the costs are not reimbursed, a claim could be made as an adjustment to the partnership return and the relevant claim for each partner is set against their own profit share rather than adjusted against the partnership accounts.
Additionally, partners can also claim capital allowances for assets acquired such as chairs, computers and desks etc.
Sole traders can also claim for working from home expenses through their self-assessment tax return, on the basis of the rates mentioned above.
Further guidance on working from home expenses
Employers seeking guidance on dealing with other general expenses for homeworking employees can find more advice in our blog posted last year, accessed via this link.
For advice tailored to you, please don’t hesitate to get in touch with Julie Walsh using the button below.
This information is correct as of 15 April 2021. This blog is for general guidance only. Recipients should not act upon any of the information provided without seeking specific professional advice tailored to your circumstances, requirements or needs. Please contact PM+M before making any decisions based on any matters relating to this blog.
