Working from Home Allowance – how to claim
Homeworking has become the norm for millions of people following the pandemic. But did you know, you may be able to claim tax relief for additional household costs? Here's how you can claim up to £280 from the government's working from home allowance, including who is eligible and how to backdate your claim.
Update: If your employer asked you to work from home during the pandemic, you can claim up to £280 in working from home tax relief. However, you need to act fast to claim the allowance as recent unconfirmed reports in The Telegraph suggest HMRC may be about to change the rules. You can make a claim if you only worked from home for as little as a day. So, it makes sense then to crack on and put in your claim for the 2020-21 and the 2021-22 tax years now.
What is the Working from Home Allowance?
Back in 2003 the government introduced working from home tax relief. It allows for, anyone working from home, to claim back some tax to help cover the increased household costs associated with doing your job there. For example, increased electricity and heating costs.
It used to add up to a £4 a week tax-free sum. However, because the pandemic forced millions more people to work from home, the government upped the amount to £6 a week.
The rules were also temporarily changed so you don’t need to prove you work from home regularly. Instead, you can claim up to £280 even if you only worked from home for one day.
Am I eligible for working from home tax relief?
You must meet the criteria to be eligible for working from home tax relief. You can claim if:
- Your employer told you to work from home. You are ineligible if you chose to work from home.
- Your household costs have increased because of working from home.
- Your employer is not paying you expenses to cover the extra costs associated with working from home.
You can’t claim working from home tax relief if you are self-employed. Instead, though you can include some expenses on your tax return.
You can backdate claims for the working from home allowance, so there is still time to claim for both the 2020-21 tax year and the 2021-22 tax year.
Need independent financial or tax advice? Find a local adviser and book your free initial consultation through our partners at Unbiased.
Find an IFA
You don't have to make life's big financial decisions alone. Get the right IFA for you today with our partners at Unbiased.
How to apply for the working from home allowance
HMRC have set up a specific online portal where you can claim working from home tax relief. You can find it at www.gov.uk/tax-relief-for-employees/working-at-home.
The portal starts off by asking you a series of question to check you are eligible for the working from home allowance. After that you will need your Government Gateway user ID and password to make your claim. If you don’t already have a user ID, it takes a few minutes to create one.
Once you’ve logged in, you need to give the date of when you started working from home. If this was the start of the first lockdown back in 2020, the date will be 23 March 2020. You can then claim the working from home tax allowance for the entire 2020/21 tax year plus the two weeks before. This is because the new tax year starts on 6 April, but lockdown started on 23 March. You can also claim for the 2021/22 tax year at the same time.
If you pay your tax via self-assessment, you can’t claim the working from home allowance through the portal. Instead, you’ll need to apply via your tax return.
How much tax relief can I claim?
The working from home allowance is designed to cover the extra costs you incur when you work from home rather than heading off to the office. It can be tricky working out exactly how much of your heating or electricity bill is associated with the time you were at your desk so there is essentially a flat rate of £6 a week you can claim.
You can get this payment in two ways:
- Your employer can pay it. You can get an extra £6 a week tax-free through your salary.
- You can claim tax relief on it from HMRC. If your employer won’t pay you the allowance, but you have extra unavoidable costs due to working from home, you can deduct the amount from your taxable income. You then claim tax relief on it from HMRC.
Tax relief on £6 a week adds up to:
- £1.20 a week for basic rate taxpayers, or £62.40 a year
- £2.40 a week for higher rate taxpayers, or £124.80 a year
- £2.70 a week for additional rate taxpayers, or £140.40 a year
If your home working costs add up to more than £6 a week you can claim tax relief for a larger amount. However, you will have to provide evidence to the taxman of what your costs were, such as receipts, bills or contracts. You must also prove these costs were directly connected to your employer’s requirement for you to work from home.
What can I claim working from home tax relief for?
You can claim the working from home allowance for any increased costs associated with you having to work from home. This includes:
- Heating bills
- Electricity bills
- Metered water bills
- Work phone calls
- Internet costs
- Home contents insurance
But you can only claim part of your bill – just the increase that relates to you being at home more. If you need an accountant to help with your tax return, our partners at Unbiased can match you with the right adviser.
If you have had to buy office equipment, your employer should reimburse you. This is normally done as a ‘benefit in kind’, which means tax and national insurance is due on the money. However, HMRC has changed the rules for people forced to work from home due to Covid-19 during the 2020-21 tax year. During that period your employer can pay you back tax-free. These costs cannot be included in your working from home tax relief claim, they should be sorted out direct with your employer.
What documents do I need to claim the working from home allowance?
If you don’t already have a Government Gateway ID, you’ll need your National Insurance number and either a recent payslip, P60 or valid UK passport.
Anyone claiming a precise amount for costs will need to provide evidence such as receipts, bills or contracts.
How will I get the money?
If you are claiming for the 2020-21 tax year, plus the two weeks before, you should receive your Working from Home allowance by cheque from HMRC.
For the 2021-22 tax year HMRC will adjust your tax code, and you’ll receive the tax relief through your salary.
Working from home tax relief backdated
How do you backdate your claim? Simply make a claim via HMRC’s Working from Home Allowance portal for the 2020-21 tax year as well as claiming for the 2021-22 tax year.
Is the working from home allowance going to end?
Tax relief for working from home has existed since 2003. The pandemic caused the government to increase the weekly amount you could claim from £4 to £6. The rules have also temporarily changed to allow people to claim working from home allowance even if they were only at home for one day.
The rule allowing you to claim working from home tax relief for a whole year even if you only worked at home for one day is only applicable for the 2020-21 and 2021-22 tax year.
Whether the allowance will remain at £6 a week is unclear. The allowance has cost the government a fortune over the past two years. In a normal year the tax relief costs the treasury around £2m. This rose to close to £500m during the pandemic, according to figures from The Telegraph. As a result, it is rumoured that the tax relief will be reformed.
So, get in quick and make your claim before the rules change.
- Do I need an Independent Financial Adviser
- How to avoid inheritance tax?
- Divorce: what happens to my home?
- Capital Gains Tax
- Transfer of ownership of property
- What to do if you inherit a house
- Probate explained
- How to avoid selling your home to pay for care
- Buying a second home
- Investing in property
- Do I need life insurance?
- Do I need a mortgage broker?
- Mortgages for the over 55s
- Lifetime ISA
- How to help your child buy a home
- Can I remortgage to pay off debts?