Covid-19 brought plenty of challenges - illness, heartache and lockdowns, to name a few. As we had to transform our homes into makeshift offices with essentials like monitors, printers, and ergonomic chairs, HMRC introduced a working from home tax relief to help manage that new added expense. However, now that the pandemic has passed, the continued claims for these tax reliefs have raised some questions. Unfortunately, the answer to the question, “can I claim working from home allowance” is not as straightforward as saying, “I work from home so I can claim”. Therefore, let’s unpack who can claim working from home tax relief below.

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Understanding working from home tax relief

The working from home tax relief allows employees to claim tax deductions for additional household costs incurred due to mandatory remote work. These expenses may include utility bills, business phone calls and equipment to facilitate a suitable working environment at home.

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Eligibility criteria 

As of the 2022/2023 tax year, the criteria for claiming this relief have been tightened. 

You can claim tax relief if:

• Mandatory remote work: your employer requires you to work from home. This could be due to the nature of your job necessitating remote work or the absence of available office space. Make sure your contract specifically states that you’re a remote worker as HMRC may require you to provide proof.
  
  Did you know that in cases where you have a mandatory remote work contract but are occasionally required to commute to work, you may be eligible to claim tax relief on travel expenses? Learn more here.
  

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You cannot claim tax relief if you choose to work from home. This includes situations where:

• Flexible working arrangements: your employment contract allows you to work from home.
• Office availability: if your employer provides an office, but you choose to work from home for personal reasons or convenience, you wouldn’t qualify for tax relief. The government website also clarifies that even in cases where your office is overcrowded, forcing you to work from home, this doesn’t make you eligible either.
  
  While this may seem unfair (and we get it!) because you didn’t choose to stay at home, you can understand that from the government’s perspective, it’s the business’s responsibility to provide enough space for their staff, not HMRC’s burden.

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What does this mean for hybrid working arrangement?

Before 6 April 2022, employees could claim tax relief even if they choose to work from home, provided they did so regularly. However, after 6 April 2022, employees can only claim if their employer explicitly requires them to work from home.

The Office of National Statistics published in July that 35% of people said they are hybrid workers. If you prefer a hybrid working environment and want to be eligible to claim the benefit, you should arrange with your employer a specific set of days you’re going to be working from home. The key to making it an eligible expense is to ensure that it is in your contract that for a specific amount of days, you’re required to work from home, rather than you chose to not come into the office.

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What expenses can be claimed?

Eligible employees can claim tax relief for expenses that are solely work-related, such as:

• Utility bills: additional costs for heating, electricity and metered water used to facilitate your work.
• Business phone calls.

It’s important to note that you cannot claim for expenses that serve both personal and professional purposes, such as rent or general broadband access. 

You may have heard people mention claiming rent, mortgage interest, internet or other costs in the past, but it’s essential to differentiate between being self-employed or a business owner versus being an employee. 

For employees, you can only claim the additional costs directly needed for your job, expenses you wouldn’t have if you weren’t working. Payments like council tax and mortgage aren’t considered eligible because they are needed for more than just employment. 

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How much can you claim?

Employees have two options for claiming tax relief:

1. Flat rate deduction: claim up to £6 per week without the need to provide proof in the form of invoices.
   
   The tax relief received will correspond to your tax bracket. For example:
   
   Basic Rate Taxpayers (20%): Relief of £1.20 per week, totalling £62.40 per year.
   
   Higher Rate Taxpayers (40%): Relief of £2.40 per week, totalling £124.80 per year.
   
   Additional Rate Taxpayers (45%): Relief of £2.70 per week, totalling £140.40 per year.
   
   

2. Actual expenses: if you want to claim more, you’ll need to complete a P87 form which will allow you to claim up to a maximum amount of £2,500. When filling out the form, you will need supporting information in the form of invoices and potential comparisons, such as your smart meter readings on the days you’re in the office vs working from home. If you’re going with his option, make sure to apportion your costs correctly.

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Self-employed individuals get a higher flat rate deduction which is calculated by the number of hours they work at home or by the actual expense incurred. For example:

• 25-50 hours per month - £10
• 51 - 100 hours per month - £18
• 101 hours or more per month - £26
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How to claim

As an employee, you can make a claim directly via HMRC’s portal. If you’re making a claim for the basic flat rate, you won’t need to provide additional evidence, however, be sure to check with your employer if they are already claiming this in your behalf to avoid double claiming.

If you submit a self-assessment tax return, you’ll need to claim through your tax return instead. Speak to your accountant or reach out if you need help with this.

Backdating claims

If you were eligible for the relief in previous tax years but did not claim, you can backdate your claim for up to four years. The deadlines are as follows:

• 2020/21 tax year: claim by 5 April 2025.
• 2021/22 tax year: claim by 5 April 2026.

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While the working from home tax relief provided significant support during the height of the pandemic, recent changes have narrowed its applicability. It's crucial to assess your current working arrangements against the updated criteria to determine eligibility and if you qualify, understand the steps involved to claim. If you need help with the above, get in touch.

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