Millions of UK employees are now working from home due to the coronavirus outbreak. If you are an employee working from home, you could be eligible to claim a working from home tax refund for the extra expenses that you incur as a result, such as gas and electricity. 

Typically as an employee working from home during Covid-19, you will be making great savings by managing without commuting, eating-out and meet-ups, which are all still sadly off-limits. But there are hidden costs to working from home.

This cost differential is evident from the tens of thousands of gallons of milk now needing to be dumped by farmers due to the closure of coffee shops and meeting places. Covid-19 is responsible for a plummet in demand for the food service industry on the whole by as much as 50%.

Whatever your personal and financial situation, we are here to help you calculate and reclaim your tax refund for working from home, to make sure that for you, it’s business as usual at the end of every month. 

Claim a tax refund for working from home

If you are an employee, you can claim a tax refund for working from home. This aid has been available from HMRC since 2011, but previously, conditions for this form of tax relief from HMRC were so hard to meet, that few employees attempted to make the claim. But things have changed. 

Now, employees working from home are entitled to claim a weekly, default-rate refund for working from home, without needing to calculate their outgoings in exact detail. 

 

Working from home tax refund

In a surprise answer to the Parliamentary question on 27th March, over whether workers who have been advised to work from home during the COVID-19 outbreak are eligible to claim a tax refund for working from home, Jesse Norman MP confirmed this to be true, and added to this the announcement that the default weekly rate that employees can claim would increase from £4 to £6 per week, from the 6th of April 2020. 

The working from home tax refund allowance was increased in the Governments spring budget from £4 to £6 a week (or £26 a month) with effect from 6 April 2020. An employer can pay this fixed sum, tax-free and NIC free, to meet the additional costs an employee incurs by working at home and from home-working arrangements. This indicates that there are likely much higher sums to be reclaimed for some professions. 

On 15th of May 2020, HMRC officially updated its guidance to state that it would accept that employees who are required to work from home can claim a deduction of £6 per week without having to justify that figure, applicable from 6th April 2020, stating that this default-rate of tax refund for working from home was introduced “for ease of administration”.

 

Home-working

Home-working arrangements mean an arrangement between the employer and the employee (ideally in writing) under which the employee works at home regularly as part of their job, not just informally at weekends or evenings.

Home-based employees will be eligible to receive a tax refund for working from home, a tax-free allowance from the date that their employer agreed they could work from home, or from when government advice was announced.

 

What will you receive?

Employers usually pay for everything their employees need to do their job. But things work out differently during a global pandemic. If you have had to spend money on your own equipment to perform your job, you can make a claim a tax refund for working from home called a ‘Tax Relief Claim’.

The base-rate available per employee without calculation has been raised to £6 per week. Of course an employer can pay you more than £6 a week, provided there is evidence to support the additional costs incurred. Otherwise any excess will be subject to income tax and NIC. The alternative for an employer agreeing to a bespoke scale rate with HMRC is currently improbable. This is where we can help.

Additional costs which can be reimbursed include the increased cost of heat, light, insurance, water and telephone or broadband, but not fixed costs such as mortgage, interest, rent or water rates.

There are plenty of professions that regularly exceed the flat-rate offered by HMRC. We can help you claim a larger tax refund for working from home for other expenses that your employer might not already be paying for. We can help you calculate your claim and reimbursement.

 

Working from home expenses 

HMRC have some basic rules in place to help employees determine whether you are eligible to claim. In short, there are two ways to identify whether or not you can claim a tax refund for working from home.

First of all, you need to have used your personal money to buy things – such as protective equipment or small tools – to do your job. It is also important to remember that the rules state that you can only use this equipment for work – not for personal reasons.

Secondly, you won’t be able to claim tax relief if your employer pays you back for expenses. Also, you cannot claim for anything you use as an alternative. For example, if your employer has given you a hammer, you cannot claim for buying and using a different brand or type of hammer.

Finally, you must have already paid tax during the year that you are claiming. Your tax relief will be determined by the amount of money you have spent and your current tax rate. Let’s assume you are at the standard rate of 20% tax. If you buy a piece of equipment for £50, you can claim for 20% of the cost of that equipment – in this case, £10.

 

When can you claim?

You need to have paid tax already in the year you make a claim. However, you have four years to make a claim from the time you have spent the money. When you claim for the same year, HMRC will tend to give you your adjustments in your tax code so the money will be ‘paid’ back to you this way. For claims from the previous four years, however, HMRC will generally make an adjustment to your tax code, but they also might send you a tax return – you will need to fill it out and return it.

 

What are some examples of job expenses?

OK, so let’s imagine that you work for an employer who requires you to wear protective clothing to perform your role. While many companies will give you the relevant equipment, not all will – in some cases you may have to buy it yourself. It’s the same principal for uniforms, small tools, and specialist equipment – anything you have to buy to do your job.

You might be required to clean, replace and repair the PPE you use. If you have to wear a set of specialised clothing e.g.uniform, then you also might be eligible for tax relief. A good example of uniform costs is nurses who are needing to buy their own scrubs. 

To note, the rules state that tax relief is not allowed for uniforms that are simply clothing of a specific type or colour – you can’t claim if your boss wants you to wear blue t-shirts, for example.

We have you covered

As an employee you can claim a tax refund for working from home for an astonishing array of things – as long as it can be proved that anything you claim is exclusively work-related. Perhaps professional fees and subscriptions that you need to have for work. 

What you cannot claim for is anything you use for both private and business use i.e. your internet connection or your coffee pot. And lastly, sorry for this, but you cannot claim for anything while working from home, if you are choosing to work from home – it has to be non-voluntary. We can help you make this distinction. 

Do you need help with claiming a tax refund for working from home as an employee? If so, don’t hesitate to call us. Prestige can help you file the self-assessment in order to claim, and will ensure that you get back everything you are owed. Call us today for a quick chat or to arrange a consultation on 0203 773 2927.