Since the outbreak of COVID-19 last year, homeworking has become the norm for millions of people, which leaves many wondering what recompense (if any) employees are entitled to, to cover additional costs incurred as a direct result of new remote working arrangements.
As of April 2021, HMRC confirmed that remote workers could continue to claim additional household expenses incurred as a result of working from home during the COVID-19 pandemic in the 2021/22 tax year.
This homeworking tax relief is to be available on the same terms as the 2020/21 tax year for employees who incur additional household costs because they have to work at home on a regular basis, either for all or part of the week, meaning that as long as the individual had been required to work at home for some period during the 2021/22 tax year, they will be able to claim tax relief from HMRC for the whole of the 2021/22 tax year. It should be emphasised that the decision to work from home has to be mandated after discussion with the employer and not merely a personal choice.
The claims portal is now open for tax relief claims for additional household costs up to 5th April 2022, and HMRC have confirmed they will be accepting claims for the full year’s expenses for the 2020/21 and 2021/22 tax years for eligible employees, including those who work on a part-time basis. Individuals who complete a Self-Assessment Tax Return (‘SATR’) can make their tax relief claim via their SATR.
What costs fall within the scope of qualifying expenses?
HMRC have previously advised that to be eligible for the tax relief, employees must carry out work which has directly generated additional household costs as a result of working from home, such as:
- Metered water bills
- Additional costs incurred from making business telephone calls (not line rental or calls made as part of existing mobile contract costs)
Costs that would have otherwise stayed the same if the employee worked from home or in an office would not be included such a mortgage interest or rent, council tax, broadband internet access etc.
What does this mean for employers/employees?
Employers can pay the increase in costs that are eligible to be reimbursed. Only additional costs generated as a direct result of working from home can be reimbursed by employers tax-free as detailed above.
To avoid the employee having to evidence the additional costs, the employer can instead pay the following fixed amounts:
- £6/week for weekly paid employees from 6 April 2020; or
- £26/month for monthly paid employees from 6 April 2020.
The weekly, flat-rate amount applies equally to part-time workers and it is not necessary to pro-rate it because the employee does not work at home full-time.
If the employer chooses not to reimburse some or all of the additional homeworking costs then as detailed above, the employee can claim tax relief for the 2020-21 and 2021-22 tax years via the HMRC portal.
Where employers were contributing towards homeworking costs, but not the full £6 a week/£26 a month amount, employees can seek tax relief for the difference. The tax relief will be given by adjusting the employee’s tax code for the 2021/22 tax year.
Employees can make a claim via the HMRC online portal, by phone, post or if they are registered for SATR, through their tax return.