The UK work from home tax relief is an allowance to offset the additional cost of gas, heating, electricity and internet for those working from home.
While it has been in place for almost 20 years, employees being told to work from home during the pandemic has led to rising costs for the government that are no longer sustainable.
In light of this, and the end of the government’s work from home order, millions of home workers will no longer be eligible to claim support.
In this article, we’ll cover:
- How does the working from home tax relief work?
- How much is work from home tax relief?
- Why is the UK work from home tax relief scheme ending?
- What does this change mean for you?
How does the working from home tax relief work?
The UK work from home tax relief is an allowance to offset the additional gas, heating, electricity and internet costs for those working from home.
Initially brought in back in 2003 to support home workers and those who are self employed, the scheme allows people to claim a rebate from HMRC to cover the increased utility costs associated with working from home.
While this relief has existed since before the COVID-19 pandemic, the government’s work from home order meant that uptake of this allowance has dramatically increased over the last two years.
The rebate only applies to those who were told to work from home by their employer, and not those who were asked to return to their place of work but chose not to. However, if you have been required to work from home during the pandemic, even only for a single day, you can claim the UK work from home tax relief.
How much is work from home tax relief?
You can either claim relief on £6 per week, or the exact amount of additional costs incurred above the weekly amount. For the standard rate, there’s no need to keep records of your extra costs. If you claim the exact amount, however, you will need to provide evidence such as bills and receipts.
The refund is based on the rate at which you pay tax. A person paying the 20% basic rate of tax and claiming on costs of £6 a week would receive £1.20 from HMRC.
The UK work from home tax relief equates to £125 per year from April to April. However, the scheme is not being continued for those working from home after April 2022.
Although it is set to come to an end, those who were required to work from home during the pandemic can still claim a refund for the periods of 2020–2021 and 2021–2022. If you haven’t already done so, check your eligibility and claim your rebate.
Why is the UK work from home tax relief scheme ending?
The government’s stay-at-home order, along with the legal requirement to self-isolate if you or a close contact tested positive for the virus, caused the rates of home working to skyrocket. This meant a huge surge in costs for the government, as they were providing UK work from home tax relief for an unprecedented number of people.
At the start of 2020, just 5.7% of UK workers reported working exclusively from home. By April the same year, this shot up to 43.1% in light of the government’s guidance to stay at home to reduce the spread of coronavirus.
However, rather than being scrapped, the scheme is returning to its pre-pandemic criteria, meaning that sole traders and those who work from home on a regular basis can still claim their regular allowance. The government expects that claim levels will return to something similar to what they were before the pandemic, significantly reducing the Treasury’s bill.
What does this change mean for you?
It’s important to understand the changes to the availability of the rebate, and what they mean for workers and employers.
What this means for workers
Along with no longer being able to access UK work from home tax relief, those who are working and earning over the minimum threshold will be faced with higher National Insurance contributions. There are likely to be even more tax hikes on the horizon as the government tries to recoup some of the money spent on pandemic support.
UK workers probably won’t be seeing any more COVID-related financial support, so it’s well worth claiming a rebate if you can. Check your eligibility for UK work from home tax relief and apply online on the government’s website. If you’ve had to work from home at all and your household costs have increased, you can claim for a full year, regardless of how many days you spent away from your place of work.
What this means for employers
As an employer, you can choose to reimburse employees for reasonable additional household expenses incurred while working from home. If you can afford it, this could be a nice gesture to support your workers, particularly with the increased costs of NI, utilities and the general cost of living.
If you do this, employees cannot also claim a rebate through the UK work from home tax relief scheme, unless your payments are below £6 per week. In this case, they will be able to claim the difference from HMRC, providing they meet all other eligibility requirements.
How is your business handling the end of UK work from home tax relief?
As with any government legislation reforms, businesses must adapt and react quickly to ensure a smooth transition for employers and employees alike.
Advanced’s range of HR software and payroll software seamlessly handles big changes like this, reducing hassle of implementation and making it easy to make any further adjustments to employees’ pay should the need arise.
To find out more about the future-proofing capabilities of our HR and payroll solutions, get in touch with us today and book your demo.