For many of us working from home has become the norm for the past few months, and whilst savings are being made on travel costs, many of us may not be aware that additional savings can be made. From 6 April 2020, employers have been able to pay employees up to £6 per week tax-free in order to cover additional costs if employees have had to work from home, in response to COVID-19.
Where employees have not received the expense payment direct from their employer they can apply to receive the tax relief from HMRC. On 1 October 2020, HMRC launched an online portal to make it easier for individuals to apply for the tax relief. Eligible taxpayers are able to make a claim for tax relief based on the rate at which they pay tax. For example, if an employed worker pays the 20% basic rate of tax and claims tax relief on £6 a week, they would receive £1.20 a week in tax relief (20% of £6 a week) towards the cost of their household bills.
Higher rate taxpayers would therefore receive £2.40 a week (40% of £6 a week). Over the course of the year, this could mean taxpayers can reduce the tax they pay by £62.40 or £124.80 respectively.
It should be noted that if you file a Self-Assessment Tax Return you are unable to use the online service, instead the claim should be made when completing your 2021 Tax Return.
Once the application has been approved, the online portal will adjust an individual’s tax code for the 2020/ 2021 tax year. The employee will receive the tax relief directly through their salary and will continue to receive the adjustment until March 2021. HMRC have also stated that even if an individual has only worked from home for part of the tax year, or you are a part time employee, a claim can still be made for the relief to apply.
Where a claim is made, evidence does not need to be provided to HMRC unless you are applying for tax relief on costs above the £6 per week flat rate, in which evidence of the increased costs may be required.
Employees could alternatively receive the tax relief as a lump sum payment if they wait and apply once the 2020 to 2021 tax year has ended.
Eligibility and claims are completed online and can be found at https://www.gov.uk/tax-relief-for-employees/working-at-home – tax advisers are not permitted to make claims on behalf of clients.
If you require more information or would like to get in touch for help and advice, give us a call on 0207 600 5667 or contact Seth Biseem at Seth.Biseem@elmanwall.co.uk.