Information on employee tax relief

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HMRC has confirmed that the work from home tax relief scheme is being extended until the end of the 2021/22 tax year. 

Consequently, people working from home can apply for work from home tax relief for both the previous and current tax year. 

With advice still encouraging people to work from home whenever possible, millions of workers are likely to be able to claim tax relief once again. 

We look at what it means, what can be claimed, and how employees can apply.

What does the extension mean?

Employees can claim for the entire 2021/22 tax year regardless of whether they have worked more than one day at home. 

To claim, employees will need to complete a declaration form that proves the additional costs of working from home. These costs must directly result from working from home and not include those that would remain unaffected by either working at home or in an office. 

What can be included in the costs?

Costs such as heating, metered water bills, contents insurance, business calls or a new broadband connection can be claimed. 

Fixed costs that would stay the same regardless of whether someone worked at home or an office – e.g. rent – are not applicable. 

What can be included in the costs?

Heating, metered water bills or business calls are some examples of the additional costs that can be claimed.

Who is eligible? 

Employees can apply if they have to work from home either on a part-time or full-time basis. 

Those who make a conscious choice to work from home do not qualify. 

How much can be claimed?

Three different values can be claimed. This is because the way the claim is managed will vary the amount an employee receives. 

The amount that can be claimed is £6 a week. This is the maximum amount that can be claimed without an employee having to provide evidence of the extra costs incurred. 

However, contrary to what many people may think, this is not always the amount that an employee will receive. 

Instead, the amount received in tax relief will be dependent on the amount of tax an employee pays. For example, the amount received in tax relief will be £1.20 for those taxed at the basic rate of 20% and £2.40 for those at the higher 40% tax rate. 

For employees to receive the full £6, employers can provide £6 a week to their employees as a tax and NI-free expense to cover any additional expenses incurred. This is always at the discretion of the employer.

The final option that employees can explore is claiming tax relief on the exact amount of any extra costs incurred above the weekly £6.00 allowance. However, in this instance, receipts, bills and contracts will be required.

How can employees claim? 

Employees can claim via the government website

They’ll need a Government Gateway user ID and password. Creating a Government Gateway ID usually takes about 10 minutes. The process is more straightforward if someone has their NI number and a recent payslip, P60 or UK driving licence to hand.

If employers are paying the £6 themselves, it would be processed through payroll. 

What happens if a claim is successful?

If a claim is successful, the employee’s tax code will be amended and the amount reimbursed will then appear on the employee’s payslip.

PayFit blog author

PayFit blog author

PayFit

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