One of the few positives that has come out of the COVID-19 pandemic is that working from home or a hybrid working pattern has become the new norm for many businesses within the UK. One of the key aspects of this new norm is understanding the potential expenses that can be claimed from working from home.
You can claim expenses when working from home providing your job requires you to live a significant distance from your employers’ offices or if they lack a physical office. You can’t claim expenses if it’s your own choice to work from home, due to COVID-19 or when the office is occasionally full.
In this blog, we will look into the potential expenses that can be claimed while working from home providing that they meet certain criteria.
What are the eligibility criteria to claim working from home tax relief in 2023?
During the pandemic, whilst other government restrictions were in place, tax relief for working from home eligibility criteria was relaxed so most employees could claim for working from home.
Since April 2022, these relaxations ceased. From this date, to make a claim, the following eligibility criteria need to be met:
- Your job requires you to live far away from your employer’s premises
- Your employer does not have office space
You are no longer eligible to claim tax relief for working from home if your employment contract lets you work from home some or all of the time, or if you work from home but cannot go there sometimes because it is full.
If you choose to live two hours from the office space and your contract enables you to work from home, and there are appropriate facilities for you to work from your employer’s business premises, you will not be able to claim tax relief for working from home.
Alternatively, if you are a sales manager for the north east and your head office is in central London, your job requires you to live away from the employer’s premises so you are eligible to claim.
How can you claim working from home expenses?
You can claim working from home costs either through your employer reimbursing you for the costs that you have incurred or through claiming working from home tax relief.
A working from home tax relief claim can be made either through filing a self-assessment tax return or completing a paper P87 form for each tax year you are claiming tax relief for.
How much tax relief you receive will depend on whether you are a higher or basic rate taxpayer and the amount of expenses you can claim. Using this method will only reimburse the tax paid on the costs of working from home and not the full expenses incurred.
Basic rate taxpayers will receive 20p for every £1 incurred, and higher rate taxpayers will receive 40p for every £1 incurred.
HMRC will accept backdated claims of working from home tax relief of up to four previous tax years through the portal on the government gateway. To do this you will need a government gateway id and your national insurance number.
Once an initial claim has been made, HMRC will amend your tax code so that you get tax relief during the tax year rather than waiting until the end of the tax year. They may also require you to complete an annual tax return each tax year moving forward, especially if you are claiming for tax relief on extra costs.
If you have any questions about claiming home working expenses, let Spotlight Accounting provide the answers. Our specialists are on hand to give expert advice tailored to your situation, get in touch with us today.
Will employees need to be reimbursed by their employer?
Employees won’t need to be reimbursed by their employer, but where an employee has been claiming expenses for working from home, a claim for tax relief can not be made.
If your employer only reimburses part of the eligible costs you pay, you can claim tax relief on the proportion of additional household costs you are not reimbursed for.
What is deemed as claimable expenses?
For an employee, there are two ways in which you can claim working from home expenses. These are known as the flat rate and the additional costs method.
- Flat rate
A flat rate of £6 per week (£4 prior to 6th April 2020) can be claimed for tax relief. This method is the simplest to claim, and no evidence needs to be retained such as bills, receipts or contracts.
- Additional costs
Under this method, you can claim the additional household costs you have incurred from working from home, such as the additional costs of business phone calls and gas and electricity. Under this method, you are required to keep detailed records, including utility bills.
For a self-employed individual claimable expenses are more generous. Again, there are two methods:
- Flat Rate
This can vary from £10 to £26 per month depending on the hours you work from home per month.
- Proportional costs
Under this method, you can claim tax relief on the proportion of your household costs that are used for business. This includes heating, electricity bills, council tax, mortgage interest or rent and broadband bills. A reasonable method of dividing costs must be used, and if HMRC were to inspect you, you must be able to provide evidence supporting the exact amount claimed.
Other claimable costs include work-related expenses such as computer equipment, including consumables such as keyboards, monitors and mice, and office supplies such as stationary and ink.
What expenses can’t you claim for working from home?
In most cases, you can not claim tax relief for expenses that are not used for business purposes. HMRC use the phrase “Wholly, exclusively and necessary”, this is why you can’t claim tax relief for the full telephone and internet bill you pay, but you can claim for the extra costs of business phone calls.
You can make successful backdated claims for up to four years, for tax relief on working from home expenses that have not been reimbursed by your employer.
Claiming tax relief can be done through either a form P87 or completing a self-assessment tax return for the current and previous tax years you are claiming. Whilst you won’t get the full amount of the expenses incurred, you will receive a refund of the income tax paid on these amounts.
If you are confused about what you can claim for your home office, then get in touch with Spotlight Accounting for expert assistance and personalised advice.