Martin Lewis: Working from home due to coronavirus, even for a day? Claim a year's worth of tax relief
New 20 October 20: Required to work from home even for ONE DAY since 6 April? You can claim tax relief for the WHOLE YEAR – worth £60 or £125.
Claiming working-from-home tax relief has exploded in the last couple of months (possibly pushed by this very blog) so HMRC has just revamped the system, with a brand new microservice to simplify the process. When we first saw it, we couldn't quite believe it meant you'd automatically get the whole tax year's claim, regardless of how long you were at home for.
So I asked MSE Amalia, who was working on it with me, to double then treble-check. She did. Yet I was still doubtful so I got on the phone to HMRC's press office myself. It was a detailed, long, sometimes technical conversation, but in my head, in a nutshell, it went something like this…
Me: 'Are you really telling me you'll give a year's tax relief even if someone only needs to work from home for one day?'
HMRC: 'After your questions, we've put this to our policy people – specifically the bit about "if you must work at home for less than a week, can you claim for a year?" – and they say yes.'
Me: 'You know I'm going to press the metaphorical big red button and go huge on this don't you?'
HMRC: 'We know Martin, so we expect it to be everywhere, but that's the answer.'
Me: 'To make this watertight can I have a direct quote in writing?'
They agreed, so here it is. HMRC says: "We recognise that the working-from-home situation is very fluid this year, so we're accepting claims for the full year's expenses. That includes even if people have only worked from home for some of the year, to avoid needing to contact us if you have to work from home again."
In other words, the policy, only for this tax year, has been done, in part, as recognition that this year is very different, and, in part, to save HMRC's processing costs to stop people needing to put in multiple claims, having had to work at home, then not at home, then back at home again. And so if you're due it, do it straightaway as you get the whole year.
Already put a claim in for this tax year? Don't worry, you won't miss out, but as I explain below you will need to take more action to get the whole amount.
Here's my updated original blog, that started all this off, to take you through the nuts and bolts.
If your employer requires you to work at home, you can – and always have been able to – claim for increased costs due to working from home, eg, heating and electricity.
Clearly, right now many firms have closed workplaces (again) and that means across the UK millions of staff are temporarily required to work from home, even if it's just for part of the week. Therefore you're eligible to claim if you've had increased costs due to it. HM Revenue & Customs (HMRC) has specifically confirmed that claims from employees working at home due to coronavirus measures, if their usual workplace is closed, count.
But apportioning extra costs such as heating and electricity is tough. So instead you can, in simple terms, claim a rate of £6 a week. There are two ways to do this:
- Employers can pay you £6 a week extra tax-free. Employers can give you an allowance up to this amount and what they give you is free from tax, so you get it all (to give you more, it will need to make special arrangements).
But right now – with many firms struggling – asking may be bad timing, so instead you can...
- Claim tax relief on £6 a week. If your employer won't pay expenses for your extra costs due to necessary working from home, but you have them, then you can ask for the amount to be deducted from your taxable income. To make the process easy, HMRC says that claims in line with the employers' payment (ie, for £6 a week) will not need to justify that figure – meaning you won't need to keep receipts or prove information. Tax relief of £6 a week equates to a gain of £1.20 a week for a basic 20% rate taxpayer, £2.40 a week for a higher 40% rate taxpayer.
If you believe you have higher increased costs than £6 a week, you can claim more, but you will need evidence of the cost increases and be able to apportion these specifically to the fact you are working from home – and this becomes a much more laborious process.
If you prefer to watch rather than read, here's a clip from The Martin Lewis Money Show, which explains in detail how it works and the changes I mention in the box above. Clip courtesy of ITV, originally broadcast on 22 October 2020.
In Oct 2020, HMRC changed the system so you get a whole year's relief
Now for this tax year only, you only need to claim once, and you automatically get it claimed for ALL of this tax year at the £6/week relief rate. That's a gain of £62/year for basic rate taxpayers, £124/year at the higher rate. So if you have had to work at home at any point since 6 April 2020 (the start of the tax year) and you have higher costs due to it, no need to delay, claim immediately.
What if you're only required to work at home part-time?
Many offices and places of work have been reopening (and closing, and reopening...), but to ensure they are Covid safe, fewer employees can go into the premises at any one time. Often this is done by allowing different employees to come in on different days, and stay at home on the rest.
HMRC has confirmed to us that as long as you are required to work at home and have additional expenses due to it, even if...
- It is only working from home part-time
- Others are going into work
- You are only needed to work at home, say, one day in five and were in the office the rest of the week
... you can still claim the full £6 allowance (whether as a payment from your firm, or as a tax break) and you too can claim for the entire 2020/21 tax year.
If a couple both work from home, can they both claim it?
The working-from-home tax relief is an individual benefit. So if you've had an increase in costs because you're required to work from home, you can claim it. If two or more of you live in the same property, you're all required to work from home and it's fair to say that costs have increased specifically from each individual working from home, then you can all claim it.
To process these claims, in October 2020, HMRC set up a new dedicated working-from-home microservice that will automatically apply the whole 2020/21 tax year's relief via your tax code – making claiming the whole amount very easy. Anyone making a claim for this tax year, who hasn't already put in a claim, can use it.
In fact, you can actually use it to claim just a smidge before this tax year too. You can use it to make a claim since lockdown started on 23 March 2020 – just put that date in. Do that and you'll get a refund for the whole of this tax year (which started 6 April 2020) and two weeks extra on top.
You'll need to have your Government Gateway ID to do it. If you don't have one, you can create one as part of the process. Along the way you'll also be asked if you're claiming any other work-related expenses, and as a note, if you wear a uniform to work, it's worth reading our Uniform Tax Rebate guide first, to see if you can claim that too.
Don't expect to receive a cheque for this money though. It is done by altering your tax code, which is what indicates to your employer how much tax to take off your payslip – it should be amended in your personal tax account within a couple of days. The result will be less tax taken off each month for the rest of the year which means you'll take home more.
Here's what the microsite looks like...
If you read this blog before the update, you may have already made a claim for the weeks you've worked from home, through an online P87 form or postal P87 form.
If so, while you won't be able to use the new microservice, you can still claim the allowance for the rest of the year, even if you haven't worked from home since you first claimed it. Just fill in another P87 form (online one is easier), this time clearly stating the amount for the year as the maximum £312 (£6 x 52 weeks) – don't worry, this isn't double-submitting, HMRC has told us to tell you to do this.
The key section for filling in is titled 'Using your home as an office' (pictured below). Assuming you're not eligible for tax relief on other work-related expenses, such as the uniform tax rebate, leave them blank.
In the online form, there are two boxes:
- 'Amount paid by you.' HMRC has confirmed to us that provided you've had increased costs and had to work at home at some point since 6 April 2020, then put in £312 – the maximum amount, equivalent to £6/wk for 52 weeks. You won't need to show receipts. Even if you've already claimed for any amount, you still need to put the full £312 amount here.
(If you're claiming for the prior tax year, instead only put the amount that relates to the number of weeks worked.)
- 'Amount paid to you by your employer.' If your employer hasn't paid you a working from home allowance or reimbursed your homeworking expenses, just put £0.
If you're claiming through the postal form, you'll need to add a 'Using your home as an office' expense manually in the 'Other expenses' section.
Once you've submitted the claim, if you did it online you may hear back within a couple of weeks. However, obviously if HMRC is under pressure, and this may well make that happen, it may take longer.
If you do a self-assessment form you can't use the microservice
Those who are employed but do their tax via self-assessment each year (usually those with higher incomes or more complicated tax affairs) can't use the microservice.
Instead, here you can claim the allowance as part of the self-assessment form (it's included in section 20 on the full return and section 2.5 on the short form). HMRC has confirmed to us that for this 2020/21 tax year, when you do the form you will be able to claim for the entire year automatically, in the same way as those using the microservice. I will include a reminder of this in the MSE weekly email at the appropriate time.
As I know some accountants will want to see that claiming for the whole year is kosher, to help I asked HMRC for an attributable direct quote on this. Here it is...
HMRC says: "We recognise that the working-from-home situation is very fluid this year, and so we're accepting claims for the full year's expenses, even if people have only worked from home for some of the year. This includes customers claiming through self-assessment."
For claims before 23 March 2020, you don’t automatically get the whole tax year
If you were required to work from home before lockdown – the case for many at the start of the pandemic – you can still put in a claim for relief for that period (assuming of course you had increased expenses). Yet here, unlike this tax year, you should only claim tax relief for the weeks you were working at home, not the whole year.
Plus, the criteria applied when accepting these claims are likely to be far more strict. To do this, complete the online P87 form or postal P87 form – there's help in the 'Already made a claim?' section above. If you've been working from home for longer you can claim back up to four years, ie, to April 2016 – do a separate form for each tax year.
PS: Had to buy home office equipment if you work from home?
If you've done that and your employer is paying you back, normally this would be a 'benefit-in-kind', which means you'd need to pay tax and national insurance on it. Yet specifically for those working from home because of coronavirus, for this tax year (ending 5 April 2021) your employer can pay you in full, with no tax. There's no need for you to do anything, as your employer does this. However, if it takes tax off, point it to this legislation.
I'd be interested to know how claiming any or all of these allowances plays out in practice via the comments below. Do let me know.
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