Employees should be checking their tax coding notices and employers should be reviewing practises relating to “tax free” working from home payments with immediate effect
HMRC have recently issued confirmatory guidance that, with effect from 6 April 2022, the relaxed tax reliefs for employees who worked from home during the coronavirus pandemic will no longer be available.
Tax relief was available to those employees who worked from home due to the lockdowns imposed as a result of the pandemic, irrespective of how many days were actually worked from home. These relaxed reliefs were available for the entire tax years 2020/21 and 2021/22.
Relief was typically given via a deduction in individual PAYE tax coding notices, or by employers making tax free payments to employees of up to £6 per week, £26 per month or £312 per year.
As a result of the changes confirmed by HMRC, flexible working arrangements where employees choose or employers enable homeworking will now no longer qualify for the relief, unless there is a requirement for the employees to work from home or the situation is such that the employee cannot work from the business premises.
Two immediate actions arise as a result of the change in the position:
- Employees should be reviewing their PAYE tax codes to ensure that they do not include a deduction for the working from home allowance, unless they are actually due the relief.
It has become apparent that a number of tax codes issued by HMRC to employees for 2022/23 continue to include such deductions.
Unless an employee is required to work from home for the purposes of undertaking their job, the working from home relief will no longer be available and those employees should request that their tax codes are adjusted to remove this relief.
If the codes are not amended, further tax will be due following the end of the tax year or at such a point following an amendment to their tax codes.
- Employers should be reviewing their practises if they have been making “gross” payments to employees via the payroll in relation to working from home allowances.
Under the relaxed rules, payments of up to £26 per month could be made tax free.
These payments should now cease unless the employees are entitled to them as a result of them being required to work at home.
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