Employees feeling the pinch during the coronavirus crisis should not be looking any gift horses in the mouth.
So, employers could consider sharing with them this article explaining how they can enjoy useful tax concessions if they have been required to work from home.
There has been such an avalanche of news breaking during the current pandemic that few people have taken on board everything that could directly impact on their own finances.
In particular, one thing Chase de Vere has noticed commonly going under the radar is tax relief on certain expenses available to those who have been told to work from home by their employer to help halt the spread of the virus.
The facility is there to assist with additional costs that might be incurred from having to swap the office for the home – such as heating, contents insurance, business phone calls or a new broadband connection.
It does not, on the other hand, extend to those costs that would stay the same wherever you worked – such as rent, mortgage interest and Council Tax.
It must also be stressed that it is not normally available to those who are working from home simply as a matter of personal choice. Nor is it available to those who are already being reimbursed for such expenses by their employer. (There is nothing to stop employers doing this but many simply can’t afford to.)
A homeworker can claim up to £6 a week from April 6th 2020, without the need to keep evidence of their extra costs, and the tax relief they receive is based on the rate at which they pay tax.
So, someone paying the 20% basic rate on the £6 a week can get £1.20 a week in tax relief, and a 40% higher rate taxpayer can get £2.40 a week.
It can be possible to claim more if someone believes their increased costs exceed £6 a week but they will need to provide evidence and the process can be laborious. ¹
Even if an employee has to work from home for only a single day during the crisis they are entitled to reclaim tax relief on up to £6 a week for the whole year ¹ – meaning that basic rate taxpayers can reduce their tax bill by £62.40 and higher rate taxpayers by £124.80.
At a time when every penny counts this is certainly better than a kick in the teeth. Crucially, for this tax year only, someone only needs to make a single claim to automatically receive their entire tax year’s relief rate.
In addition, they can even claim for two weeks’ relief from the previous tax year ² if, when making the application, they enter the date of March 23 (when lockdown started) in response to the question “When did you start working from home?”
As the entire application process can only take a few minutes to complete, the time involved can be viewed as being rewarded at the equivalent of generous consultancy rates!
But it is important for both employers and employees to realise that the claim has to be made by employees themselves. The company cannot do it on their behalf via payroll.
Employees who complete a self-assessment tax return need to make their claim via this route. But those who don’t complete one can take advantage of a new and simple-to-use online portal launched by HMRC this October.
This contains plenty of useful accompanying information and can be found by visiting (https://www.gov.uk/tax-relief-for-employees/working-at-home).
Those accessing the portal are asked to set up a Government Gateway user ID and password – but if they already have these they can simply use them to log in. To set up the ID and password they will require their National Insurance number and a recent payslip or P60 or valid UK passport.
From then onwards it is simply a case of logging in and answering a few straightforward questions. Once the application has been approved, the individual’s tax code (which tells payroll how much tax to deduct from a payslip) will be automatically updated for 2020/21 tax year.
The employee will receive the tax relief directly through their salary and will continue to receive the adjustment until March 2021.
² Tax relief up to £4 per week before 6/4/2020
The Financial Conduct Authority does not regulate Tax Planning
Content correct at the time of writing and is intended for general information only and should not be construed as advice.