Martin Lewis: Working from home due to coronavirus, even for a day? Claim TWO years' worth of tax relief
IMPORTANT UPDATE 28 Jan 2022: Unconfirmed reports in the Telegraph suggest the Treasury may close the working-from-home tax rebate microsite, so employees can no longer claim a whole year's rebate if they've worked from home at any point, even for just a day in this or the last tax year – similar changes would likely affect self-assessment claims too. While there’s no date attached, for safety, if you haven't claimed yet and are eligible, read below and do it now...
If your employer requires you to work from home, you've always been able to claim for increased costs, eg, heat or electricity, for the specific time at home. Yet during the 2020 lockdown, HM Revenue & Customs (HMRC) launched a 'microservice' which, even if you only needed to work from home for a day, allowed you to get a WHOLE year's tax relief.
And that applies for the 2021/22 tax year too – meaning many are due TWO years' relief, worth up to £280. For most people this is simple to do, so I want to take you through it step by step (do note there's a separate route if you do self-assessment via a form).
These changes are all, of course, driven by the pandemic, which has seen many firms have to close workplaces, sometimes several times, meaning millions of UK staff have been required to work from home temporarily, even if just for part of the week (more info on part-time work rules below).
HMRC has specifically confirmed to me that claims from employees working at home due to coronavirus measures, if their usual workplace is closed, count for this relief. The same also applies if you have to work from home because you've been told to self-isolate by NHS Test and Trace, or because you're self-isolating having been pinged by the NHS app.
Since I first got tipped off about the microservice, I've pushed hard to make people aware, both here and on my TV show – and that push has worked, with substantially more than three million people having already claimed. And if you're thinking, "I won't claim as I don't feel I deserve it", why not claim and donate it to a charity that helps those who have struggled during this time?
For most people, £6-a-week 'costs' is the golden figure
To claim the tax relief you must have, and declare that you have had, specific extra costs due to working from home. Yet apportioning extra costs, such as heating and electricity, is tough. Due to that, there is essentially a flat rate of £6 a week available to you. 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 with many firms struggling, they aren't doing this (and they don't have to), 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, you can ask for the amount to be deducted from your taxable income.
To make the process easy, HMRC says that for claims in line with the employers' payment (ie, £6 a week), you won't 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 (£62.40 a year)
- £2.40 a week for a higher 40% rate taxpayer (£124.80 a year)
- £2.70 a week for a top 45% rate taxpayer (£140.40 a year)
- What if you've more than £6/week increased costs? If you believe you have higher costs, you can claim more, but you will need evidence of the cost increases and must be able to apportion these extra costs specifically to the fact you are working from home – a much more laborious process.
If you prefer to watch rather than read, here's a clip from my ITV The Martin Lewis Money Show, which explains in detail how it works. Clip courtesy of ITV, originally broadcast on 22 October 2020 (so doesn't include the fact you can now claim for the 2021/22 tax year). You can turn on subtitles by using the closed captions icon in the bottom right.
HMRC started giving a whole year's relief in October 2020
In October 2020, the Government created a new temporary working-from-home microservice to help claim the tax relief for the 2020/21 tax year. It meant you could claim once and get it automatically for ALL of the tax year at the £6/week relief rate.
When we first spotted this, I couldn't quite believe it, so I pushed HMRC hard to check it was true. Eventually it told me: "We recognise that the working-from-home situation is very fluid this year, so we're accepting claims for the full year's expenses, 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."
I suspect it's also to save HMRC processing costs, to stop people needing to put in multiple claims for various periods at home due to pandemic fluctuations.
How to claim TWO years' relief (or an extra one if you've already claimed)
At the start of the new tax year, on 6 April 2021, HMRC confirmed to us the same situation will apply for this, the 2021/22 tax year.
To process claims, most employees can use the HMRC working-from-home microservice (though this doesn’t apply if you do self-assessment via a form). This will require you to have a Government Gateway ID. If you don't have one, you can set one up along the way.
You'll also be asked if you're claiming any other work-related expenses. So if you wear a uniform to work, do read about the uniform tax rebate as you may be able to claim that too. To claim the tax relief...
- Required to work from home at any point between 6 April 2020 and 5 April 2021? If so and you had higher costs due to it, and you haven't claimed yet, you can still do that via the microservice.
In fact, if you started working from home at the start of the first lockdown, on 23 March 2020, just put that date in too. Do that and you'll get a refund for the whole of the last tax year (which started on 6 April 2020) and two weeks' extra on top. Payment for these past tax years will be via a cheque / Bacs.
- Required to work from home at any point from 6 April 2021 (up to 5 April 2022)? If so and you have higher costs due to it, you can claim via the microservice too. If also claiming for the last tax year (2020/21), you can do both at once. The box for that will look like this...
If you've already claimed for 2020/21, you MUST CLAIM AGAIN for the 2021/22 tax year, via the same microservice (you won't be shown the box for last year, just this year).
Relief for the current tax year will be paid via a change in your tax code. This is what tells your employer how much tax to take. The result will be less tax taken off each month for the rest of the year.
NB: Millions of people's tax codes are wrong, and you may be due £1,000s. See our free Tax Code Calculator to check yours and also use our Income Tax Calculator to work out what your take-home pay should be.
- Will this continue in future? I don't know, but we're on top of it. When things change on this (and any other important MoneySaving), I put all details in the free (and spam-free) MSE weekly email. Do ensure you're getting it, so you don't miss out.
I get swamped with messages from people who can't believe how quickly and easily this happens. Anyone making a claim for this and the last tax year – who haven't already put in a claim – can use it.
If you do self-assessment via a form, you can't use the microservice – but ARE due the year's relief
Those who are employed but do their tax via self-assessment each year (usually those with higher incomes or more complicated tax affairs) can claim the allowance when filling in their self-assessment form:
- Online returns: Fill in the box titled 'Other expenses and capital allowances' in the employment section.
- Paper returns: 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 the 2020/21 and 2021/22 tax years, when you fill in the form you will be able to claim for the entire years 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 ongoing lockdown restrictions mean that many employees are still required to work from home for some or all of the time. Therefore, we're accepting claims for the full year's expenses for the 20/21 and 21/22 tax years for employees who are eligible. This includes customers claiming through self-assessment."
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 that as long as you are required to work from 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 from home, say, one day in five and were in the office the rest of the week
... you can still claim the full year's allowance.
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, you can all claim it.
Did you make a claim before October 2020?
If you read this blog last year, before the microservice was launched in October, you may have already made a claim for the weeks you'd worked from home, through an online P87 form or postal P87 form. Yet then you will have only claimed for the specific time you were at home rather than for the whole year. If so...
- You can still use the microservice for this tax year (2021/22).
- You are still entitled to the whole year's relief for the last tax year, 2020/21, even if you haven't worked from home since you first claimed it. To do this, just fill in another P87 form 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.
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.
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). But here, unlike this tax year, you should only claim tax relief for the weeks you were working from home, not the whole year.
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 2017 – do a separate form for each tax year.
PS: Had to buy 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. But specifically for those working from home because of coronavirus, for the 2020/21 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.
Do feed back on how this has worked for you below. I'd love to hear.
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