Throughout the COVID-19 pandemic, workers across the country have been required to work from home due to national lockdowns and to curb the spread of coronavirus. As a result, and to help with the cost of increased household expenses, the government allowed a concession whereby workers could claim an allowance of £6 per week (raised from £4 per week in the previous tax year).
Workers could claim the full yearly sum (£312) even if they only had to work from home on at least one day during the tax years 2020/21 and 2021/22. This translates to an annual income tax saving of £62.40 for basic rate taxpayers and £127 for higher rate taxpayers.
Employees could apply for the relief directly via their personal tax accounts and once the application had been approved, HMRC would make an adjustment to the employee’s PAYE tax code. Alternatively, taxpayers within the self-assessment system could include a claim against their employment income on their tax returns.
According to HMRC, 4.9 million people have successfully claimed the tax break since March 2020. If workers have not made a claim for tax relief, HMRC will accept backdated claims for up to four years and they will receive a lump sum for any successful backdated claims.
However, HMRC are now reviewing the tax relief scheme for home workers after officials warned Rishi Sunak that it had cost the Treasury nearly £500m during the pandemic – up from about £2m the year before. HMRC is now compiling a report for the Chancellor, which is expected to lead to changes to who is eligible for the tax relief and how much can be claimed.
Whilst any changes are still unknown, it is expected that the criteria to be eligible for tax relief on expenses for home working will be tightened now the ‘work from home’ government guidance has been dropped in England and relaxed in the rest of the UK.
If you would like more information, please contact Carol Edwards or your usual AAB advisor.
