You might have heard of the work from home tax relief from the UK gov, but is it worth claiming? how much effort does it take?
As the second wave of COVID-19 took hold of the UK, Borris announced on the 22nd of September that we should all continue to work from home where possible. With a little addition of this could be another 6 months!
This may be great news for those who are loving this new working from home life, without the commute and more time in their day. But as winter approaches, it’s likely that your household bills will increase, as you use more electricity and gas to light and heat your home all day every day!
So even though you might be saving money with less fuel costs, commute costs, or a smaller lunch bill, can you save even more by claiming for work from home tax relief in the UK?
What is work from home tax relief?
According to the HMRC website, “you may be able to claim tax relief for additional household costs if you have to work at home on a regular basis, either for all or part of the week. This includes if you have to work from home because of coronavirus (COVID-19).”
These costs can include things like heating, metered water bills, home contents insurance, business calls, new broadband connections, even office equipment.
Sounds great, right! Where do I sign?
Well, before you do, let me break down the jargon and tax speak to help you figure out if you should claim the work from home tax relief.
Firstly, you can not claim for anything you use for business and personal use!
That straight away makes it more complicated. So you can’t directly claim for your broadband, water, gas or electricity bills.
Instead you would have to add a second broadband connection, a water meter for your work toilet and sink, then determine the percentage of your house you are using as a home office, the percentage of time you use it, then the percentage of gas and electricity that room requires.
Record all this, and then file a self assessment tax form at the end of the year.
Yep my heart sank – and so did the majority of people in the UK. That’s why HMRC are not seeing an increase in people claiming work from home tax relief.
However there is an easier option, you can claim a taxable deduction on your income as work from home tax relief.
This is the £6 per week headline figure you may have seen!
Why is the government doing this?
Put simply, it’s an incentive to keep people working from home during the pandemic, it also levels the playing field as people who normally work from home can claim some work from home tax relief in non-coronavirus (COVID-19) times.
So now more people are working from home the rules have been relaxed a little for the 2020-2021 tax year.
How much can I claim from HMRC for working from home??
When I first read about this, I saw the headlines of £6 per week and thought that’s great as both me and my husband work from home due to COVID-19. Woo hoo! – 52 x £6 = £312 each. So £624 for the family.
As it turned out – I was wrong.
Then when I looked in to work from home tax relief, I realised its tax relief on the £6, not saving £6! Not quite as great, but possibly still worth applying for.
So here is how it actually works out based on what tax rate you pay:
- 20% tax rate is £1.20 per week, or £62 per year
- 40% tax rate is £2.40 per week, or £104 per year.
How do I apply for work from home tax relief?
First, you need to decide between the 2 options:
- the easier claim work from home tax relief on the £6
- Going all in and recording everything and doing a self-assessment tax return in the hope you will save more.
Don’t forget the word ‘maybe’ on the HMRC website.
If you are employed in the UK you will be paid using the PAYE system, which generally means you do not need to file a self-assessment tax return. So doing this might be an additional burden for you.
If you choose the easier £6 option you need to determine if you want to ask your company to sort this, or do it yourself.
I can guarantee your company is aware of this tax relief. However most companies do not advise employees on personal tax. Plus if they did, they are bringing all the work on themselves.
So you could ask for a tax free pay rise from your employer to cover the working from home expenses – I would not advise this for the following reasons:
- Most companies are struggling and we are entering a recession – bad timing!
- This creates additional work for them.
- You are already saving on the commute or fuel, lunches, time etc, so seriously you want us to do this as well (that was my company voice role play)
Therefore my suggestion would be option 1 – claim the work from home tax relief yourself.
This can be done by completing a P87 form directly on the HMRC website or requesting them to send you a form.
What’s the P87?
This is the form you need to fill in for HMRC to determine if you are eligible to claim work from home tax relief.
The good news is, you only have to do this once. Also, there is no need to fill in another form to cancel in the next tax year (unless something changes in the 2021-2022 tax year).
This applies for the full tax year 2020-2021.
The GOV.UK website will ask you the following simple questions to determine if you can claim.
- Are you only claiming tax relief on your expenses for working from home?
- Do you complete Self Assessment returns?
- Has your employer paid your expenses for working from home?
- Did you start working from home because of coronavirus (COVID-19)?
Based on your answers you will see the following which guides you to complete the P87 form using your Government Gateway login.
If you have never used Government Gateway you will need to register.
You will need your national insurance number, a recent payslip, P60 or valid UK passport.
This is the screen you will get once you answer the questions.
Will applying impact my PAYE taxes?
Yes, the tax relief will be added to your tax code.
What I am unable to determine is if this will start the need to do a yearly self assessment tax return.
My suspicion will be yes, based on if you claim any relief or benefit from HMRC this tends to trigger the self assessment.
I based this on claiming childcare when my girls were in pre-school – that triggered self assessment for us, which only stopped when we stopped receiving the benefit.
I hope I am wrong – this is just a watch out for now, hopefully HMRC can deal with it in the PAYE system!
So should I apply?
Why not? How much does your savings account give you at the moment with interest rates being so low.?
£62 or £104 is better in your pocket.
If you and your partner are both at home – double that.
You can apply without even mentioning it to your company.
The pre-check and form are simple, and you only need to do it once.
Still not sure, you can even claim this for the full tax year, yes backdated from 6th April 2020, and you have 4 years to apply!
Oh and a little extra..office equipment tax relief…
I have added this at the end as I didn’t want to confuse the whole £6 work from home tax relief.
But there is another opportunity to save money.
Until 5th April 2021 you can claim tax relief for office equipment you buy, that is not funded by your company.
As HMRC implies your company should buy office equipment for you, you can even claim tax relief on any money your company gave you to buy office equipment.
I see this as a grey area, as your company will feel COVID-19 is why you are working from home, and that they are following government guidance so why should they buy office equipment, unless there is a specific health need.
Therefore again, probably best to claim this yourself.
This claim has to be done through a self-assessment, but if you already do one, then why not add this?
It will reduce the cost of that new desk you have been eying up 🙂
Final thought on Work from home tax relief, is it worth it to claim?
I think for most people dealing with tax and the HMRC is just a hassle and something we all try to avoid.
However, this genuinely is a simple win to add a little extra in your pocket.
10 mins form filling for £62 or £104.
This will help out with your increased gas and electricity bills until the 5th April 2021!