Are you employed and suddenly working from home? Check out the tax relief you are entitled to.
If you’re suddenly working from home, there are quite a few adjustments to be made. And one thing you may not be aware of, is that you can claim a working from home tax rebate.
Being organised from the start of your self isolation means that you accumulate the evidence you need for your future claim, as you go. A much more efficient way of doing things.
Why are more people working from home right now?
In order to limit the spread of the highly infectious Covid 19 virus, we are being encouraged to work from home. The government has strongly advised all businesses to enable their employees to work from home for the duration of social distancing measures, if it is at all possible. Less contact with other people stops the virus spreading to others.
Even if you do not have any symptoms, you could still be carrying the virus and spread it to everyone that comes within a two metre radius. Thanks to the internet and our huge variety of software and apps, many people can work effectively from home.
What are the problems of working from home?
There are several issues that people are negotiating as they settle into their new work routine, things like: having a separate physical work space and desk, simultaneously working and looking after your children, not having direct access to colleagues and the emotional challenges of self isolation and social distancing.
You can find many articles and podcasts dedicated to childcare, good mental health, technological answers to communication problems and workspace interior design. And it’s all equally important. But there is less information from our realm of expertise. We want to make sure that you also know where you stand regarding available tax reliefs and allowances.
What is a working from home tax rebate for employed taxpayers?
If you are an employee working from home your tax rebate, like all others, is individualised to each taxpayer. No two claims are exactly the same. But all employed taxpayers are regulated by the same rules, regardless of the industry you work in. There are different regulations for self employed taxpayers.
If you are required to work from home as part of your employment contract, you can claim a flat rate expense of £4.00 per week, without needing any supporting evidence.
Alternatively, you can put together a claim if your actual outlay is considerably more than this amount. Now, the main consideration here is that you can only claim tax relief for expenses that are wholly and exclusively for work purposes (336 ITEPA 2003).
This actually means that you can claim for:
- Business phone calls, dial up internet access
- Proportion of your electricity and gas bill that corresponds to the room you are working in
- Metered cost of water ‘in the performance of duties’: hot beverages and bathroom use. Not water rates, unfortunately.
You cannot claim for:
- Water rates
- Rent
- Mortgage interest or endowment premiums
- Council tax
- Contents and/or property insurance
These items are not included in potential employee working from home tax relief because they are costs you have to pay anyway. They are not additional costs because you are working from home.
Usually, employees need to have the requirement to work from home written within their contract. But your employer can also simply supply you with a letter to say that this is now a requirement of your job due to the current health crisis. This is to distinguish between workers who choose to work from home and those required to be home based.
Claim your working from home tax rebate
To process a claim it’s best to start with HMRC’s website with the online process being the quickest and easiest way.
You will need to complete a form P87 which can be submitted online or printed off and posted to the tax office to the address on the form.
When the claim has been processed by HMRC you will be sent a P800 in the post which details how much you will receive in each tax year of your claim.
Any working from home tax rebate will then be sent to you via BACS or by cheque through the post.
WFH tax code
After a successful working from home tax rebate claim HMRC will issue a new tax code to include the working from home allowance.
The tax code will be sent to your employer to use in your next salary at which point you will start paying less tax because of the WFH allowance.
Having the allowance already in your tax code also means that you don’t need to make another working from home allowance claim in the future.
If your circumstances change you must tell HMRC so they can update your tax code accordingly.
Don’t miss out on the tax relief you’re entitled to
For most people, keeping a close eye on every penny is important at the best of times. Right now, it’s essential. You may discover that you can also claim for other tax reliefs and allowances, as well as the working from home tax rebate.
Many PAYE employees think that tax rebates are just for self employed workers and have never really thought about how the regulations might apply to them. For example: washing your work uniform, buying tools for work, paying for your own Trade Union or professional organisation membership fee and using your own car for work journeys.
If you are submitting a working from home tax allowance claim to save time it would be a good idea to include anything else you are entitled to on the same P87 form.
