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Can I claim my tax back if I’m working from home?

Can I claim my tax back if I'm working from home?
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    If you’re a worker who works from home, you may be eligible for tax deductions unavailable to the employee who works at the office.

    You may claim tax relief on the additional costs of working from home, like electricity, heat, broadband, etc.

    How to know if you are eligible for working from home tax relief

    Working from home is where you work from home for substantial periods on a full or part-time basis.

    If you are an employee and you’re told to work at home by your employer because of coronavirus and, as a result, your household costs increase, you are eligible to claim working from home tax relief.

    The working from home tax relief is paid at a flat rate. HMRC has made the claims process even more accessible by opening a microsite in January, where eligible workers can quickly claim online.

    How to claim tax relief for working from home

    First, you’ll have to check whether you’re eligible to receive tax relief for working from home.

    To claim the tax relief, you should:

    • Only declare expenses for working from home – other payments must be claimed differently.
    • Not pay tax by Self Assessment – as you’ll have to claim via your next tax return.
    • Not have already had your costs paid by your employer.
    • Have started working from home due to the coronavirus pandemic.
    • Have encountered higher costs due to working from home.

    From 6 April 2020, employers have been able to claim tax relief of up to £6 a week without workers having to provide proof of increased costs.

    Employees who have not received the working from home expenses payment directly from their employer can apply for HMRC tax relief.

    Employees eligible for tax relief can claim this based on the rate at which they pay tax.

    For example, if you pay the 20% introductory rate of tax and claim tax relief of £6 a week, you will receive £1.20 a week in tax relief (20% of £6 a week), or if you are a higher rate taxpayer, you will receive £2.40 a week (40% of £6 a week).

    This could mean that employed workers can reduce the tax they pay by £62.40 or £124.80 respectively for a year.

    To claim this you’ll need a Government Gateway user ID and password; if you don’t have one, you’ll be directed to the right place to get one.

    Once logged in, you’ll need to declare the date you started working from home. You can claim this even if you don’t know when you’ll be returning to the office or if you’ve only worked from home for one day.

    If your claim is successful, the online portal will adjust the tax code for the 2021 to 2022 tax year, and you will receive tax relief directly through your salary until March 2022.

    Will HMRC accept backdated claims for this tax relief?

    If employees needed to work from home last year but did not claim tax relief, they have not missed out. HMRC will welcome backdated claims for up to four years. They will gain a lump sum fee for any successful backdated claims.

    What if the flat-rate rebate doesn’t cover your outgoings? 

    If the flat-rate allowance doesn’t cover enough of the extra things you’ve had to pay for to work from home, it’s possible to claim more, but you’ll have to give evidence of your increased outgoings.

    What you can claim also varies depending on whether you’re employed or self-employed/freelancer/contractor.

    If you’re employed

    If you are an employed worker, you can only claim tax relief on expenses solely used for work purposes.

    This can include extra energy costs to power your work area or the cost of business calls added to your phone bill. However, you can’t claim for things used for both private and business use, such as rent/mortgage interest.

    If you’re self-employed/freelancer/contractor

    Suppose you are a self-employed worker/freelancer/contractor. In that case, you can claim for more costs when working from home, such as a proportion of the expenses when lighting, heating, cleaning, insurance, water rates, rent/mortgage interest and general maintenance are used for work.

    To work out the proportion/find the claimable amount, you have to account for the amount of time you’re using your home for work, and in some cases, the size of the area within the home that’s used for work purposes.

    For example, if you work in a study, you can only claim for the costs of heating that room while you work.

    If you work from home for more than twenty-five hours a week, you can use HMRC’s simplified expenses system.

    You can claim expenses via the Self Assessment tax return, which you must submit to declare your earnings each year.

    Costs incurred from working from home can be deducted from your profits, which will help you to reduce your overall tax bills.

    Note for employers

    Is there an income tax charge if we provide employees with equipment to use at home?

    Suppose you provide an employee with equipment to use at home in their employment, such as a laptop/desktop computer, monitor, keyboard, router, or a chair.

    In that case, there is no income tax charge, provided any private use is insignificant. The equipment remains your property and should subsequently be returned (if ownership is transferred to the employee, a taxable benefit will arise – P11D).

    Is there a tax exemption if we reimburse employees for the cost of home working equipment?

    If an employee purchases equipment to use at home for employment/work purposes, and you reimburse the cost; generally, this does not qualify for a tax exemption.

    However, a temporary tax exemption covers home office equipment purchased by employees and reimbursed by employers as an outcome of the COVID-19 pandemic.

    Find out how WIS Accountancy can help you claim back your working from home expenses and contact us today.

    This only applied from 16 March 2020 and is due to last until the end of the 2021/2022 tax year.

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