The Working from home allowance has changed for the 2022/23 tax year. As an individual you can now only claim it if you have to work from home (not if you choose to do so).
Who is eligible for work from home tax relief?
As an individual you can now only claim tax relief if you have to work from home and you’re not receiving expenses directly from your employer to cover the extra costs of working from home. Reasons for this could include:
- Your job requires you to live far away from your office
- Your employer does not have an office
- There are no appropriate facilities available for you to perform your job on your employer’s premises.
Who can’t claim tax relief?
HMRC have advised that you cannot claim tax relief if you choose to work from home. This includes if:
- Your employment contract lets you work from home some or all of the time.
- You work from home because of COVID-19
- Your employer has an office, but it’s sometimes busy/full, so you choose to work from home.
What can you can claim for?
You can only claim for things to do with your work, such as:
- Business phone calls
- Gas and electricity for your work area
You cannot claim for things that you use for both private and business use, such as rent or broadband access.
How much can an individual claim?
You can either claim tax relief on:
- £6 a week – you will not need to keep evidence of your extra costs
- the exact amount of extra costs you’ve incurred above the weekly amount – you’ll need evidence such as receipts, bills or contracts
You’ll get tax relief based on the rate at which you pay tax.
Example: If you pay the 20% basic rate of tax and claim tax relief on £6 a week, you would get £1.20 per week in tax relief (20% of £6).
You’ll usually get tax relief through a change to your tax code. As a result if you claimed the working from home tax relief during the COVID-19 pandemic and are now no longer eligible you need to check your tax code/speak to HMRC or you could potentially end up with a surprise tax bill.
Employers paying a work from home allowance
Since 2003, employers have been able to make tax-free payments to help employees cover their reasonable additional expenses incurred while working from home. Eligible payments are not subject to either income tax or national insurance.
For employers paying a working from home allowance during the 2022/23 tax year (rather than the employee submitting a claim to HMRC), the following applies:
If you cover any costs over the weekly limit (£6, or £26 a month for employees paid monthly), you need to be able to prove that the payments are no more than your employee’s additional household expenses.
If the payments you make are more than your employee’s additional household expenses they count as earnings, so you’ll need to:
- work out the excess and add this to your employee’s other earnings
- deduct and pay PAYE tax and Class 1 National Insurance through payroll
- for those paying under £26 a month the figure won’t need to be declared on an employee’s P11D.
- If the amount paid is over £26 a month and the extra can be justified and proven to be genuine work-related costs then again, no need to declare it on a P11D.
- if it can’t be justified then the extra (over and above the £26 per month) would need to go on the employee’s P11D.
If you would like help or clarification please do get in contact with us.