What is the home working tax relief and who is eligible?
While many people will have started to return to the office in recent weeks, many will also continue to work from home. If this applies to your employees, then they may be eligible for working-from-home allowance. This allowance (or tax relief) can either be paid to them directly in their wage-slip, or they can claim it themself via the Government’s dedicated online portal.
Tax relief can be claimed for additional household costs if they are required to work from home on a regular basis, and the claim can be made for either all or part of the week. COVID-19 is included as a reason for homeworking; however, they cannot claim if they choose to work from home.
Claiming via the Gov.uk Portal
If you will not be issuing the allowance via employee wage-slips, then your employees can still make a claim via the Gov.uk website, where they can also check their eligibility. The new online portal was introduced in October 2020, to allow employees to make a claim for tax relief more easily.
To make a claim, they will need a Government Gateway User ID and password (which can be setup if they do not already have one).
Which household costs can be included in a tax relief claim?
Costs such as heating & electricity expenses, work-related calls, internet connection and metered water bills can be included. Costs such as rent, which would remain the same regardless of whether they were at home or in an office, cannot be included. Additionally, an internet connection fee can only be reimbursed if the individual does not already pay for an internet connection at home and requires one to work remotely.
How much relief could an individual receive?
Tax relief is based upon the rate at which an individual pays tax. Therefore, if they pay the 20% basic rate of tax and claim tax relief on £6 a week, they will receive £1.20 per week in tax relief (20% of £6).
Anyone who wants to claim more than this will need to keep records and be able to show how they have arrived at their calculations.
Employees will effectively be reimbursed for the tax relief through their wage-slip as their tax code will be altered and less tax will be taken from their pay for the remainder of the tax year.
Tax relief on expenses
If an employee has purchased any equipment for homeworking, then they may also be able to claim tax relief on this. Such equipment could include a laptop, office chair or mobile phone, and more information on tax relief for equipment can be found on the Gov.uk website.
If you need support with your employee payroll or advice on any aspect of tax or accountancy, please get in touch.