Tax Relief on Work From Home Expenses

Work from home expenses:  HMRC permitted employees (including directors) forced to operate from home during the pandemic to claim a tax deduction of £6 per week towards their increased household expenses for the tax years 2020/2021 and 2021/22, respectively. However, this concession ended on 5 April 2022. As a result, HMRC has altered the tax codes of certain workers, but not all, to prevent them from the opportunity of claiming their home-based work expenses.

Check the tax code for accuracy: For example, employees who received the allowance through a change to their 2021/22 tax code but don’t file self-assessment forms had it removed for the current tax year. On the other hand, the allowance is still included in tax codes for employees who received it and claimed it as part of their self-assessment. As a result, while some employees are receiving the allowance for the current year even though they are not eligible, others are not.

They can claim a deduction if an employer doesn’t cover a worker’s homeworking expenditures. If all of the following requirements are satisfied, HMRC will approve the claim:

• the majority of the work for the job is performed at the employee’s home.

• specific responsibilities need the use of particular facilities

• the employer’s facilities are inadequate, or the employee lives too far away to commute; and

• the employee cannot select between working at the employer’s location and elsewhere.

HMRC’s claim that the last requirement must be met is dubious. However, this need can be readily met if the employer can demonstrate that the worker’s home serves as either their primary workplace or one of their regular workplaces.

HMRC states that council tax, rent, water rates, mortgage payments, and insurance premiums are not entirely and primarily incurred for the employee’s work.

For 2020/21 and 2021/22, the restrictions were amended to enable a £6 per week deduction when it’s impossible to quantify homeworking costs, such as lighting and heating. A further amount will be permitted if supporting proof is kept. Another option available to the employer is to negotiate a different average reimbursement rate with HMRC.