Working from home? Are you eligible to claim tax relief in 2023

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    Working from home: 2021 brought a lot of changes, and the biggest one was the working culture and environment. The formal atmosphere is, however, is now replaced, at least temporarily, by the work from home culture.

    In the UK, circa 8.4 million people stayed at home and contributed their bit to work. Although things are turning better, employers are looking forward to dropping the plans of working from home by the middle of this month.

    But it’s just an intention; its implementation indeed resides on the fact of how things turn up in the future.

    Work from home brought a lot of challenges plus relaxations. The most focused upon will be the ones that have a financial aspect attached.

    The essential highlighter here comes up in tax reliefs that an employee is eligible to in the general course of work.

    This blog post is divided into the following sections:

    1. What exactly tax relief is?
    2. Tax relief in general situations
    3. Work from home cases
    4. Present status of tax relief in the UK
    5. Tax relief in case of self-assessment situation
    6. Tax relief in case of different expenses
    7. Summing up all

    1. Before diving into the details, let’s understand what exactly tax relief is?

    So tax relief, in simple words, is an arrangement where you can deduct certain expenses from income to pay less tax eventually. It is a situation where you choose one of the following options:

    • Either you pay less tax
    • Or you get tax back or repay it in some other manner.

    A tax, in general cases, is deducted from your income, so you are left with two options.

    • Firstly, you can claim these amounts from the employer before the tax computation; or
    • secondly, HMRC can be approached to calculate the relief required.

    Pre pandemic, for employed people, the application of tax relief is generally allowed in the below-mentioned situations:

    Pension contributions
    Uniforms and tools
    Buying other equipment
    Professional fees and subscriptions
    Charity donations
    Maintenance payments
    Time spent working on a ship outside the UK
    If you are employed and use personal resources

    Since we are working from home, it’s essential to understand the dynamics of how the tax relief thing is going to work and get executed. Here are the insights into it.

    2. Tax relief in general situations

    Initially, an employee is liable to take tax relief only for the expenses incurred in buying things required for the job, and those are explicitly used for work purpose only. The relief stands cancelled if the employer reimburses the amount.

    For an employee, their employer usually deducts the income tax and deposits the same with the HMRC. So the relief equates to the amount spent and the rate at which tax is paid. Let’s get into this by an example.

    If you spent £70 and pay tax at a rate of 20% in the tax year 2020-21, the relief will stand at an amount of £14.

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    3. Work from home cases

    Employees who regularly work from home are also eligible to claim tax relief.

    This relief is not available if the employee chooses to work from home. It is available only if the employer extends the facility.

    Also Read: Autumn Statement- Threshold freezes create stealth tax increases

    The tax relief is provided for the expenses like:

    • Gas and electricity
    • Metered water
    • Business phone calls inclusive of internet access
    • Additional insurance
    • Any extra equipment bought for work purpose

    You cannot claim the whole amount of the bill. Specifically, the amount related to the work is claimable only.

    4. Present status of tax relief in the UK

    As per the HMRC data, circa 55,000 employed workers have already claimed this and are availing the benefits. More than 3 million claims have been received in the year 2020-21.

    HMRC has clearly stated that even if an employee is required to work from home for even just one odd day; they are eligible to claim in 21/22 years.

    The system has been made quite transparent and clear by the higher authorities, as stated by Myrtle Lloyd, the HMRC’s Director General of customer services.

    The entire filing & claiming procedure has gone online to make it more helpful during times of pandemic.

    HMRC has also clearly specified the situations where the tax relief can be claimed in the year 2020-21. They are mentioned as follows:

    • An employee is asked to do work from home but return to the office on certain occasions.
    • An employee is asked to work from home but could attend their workplace as per their choice or discretion or as their nature of work demands.
    • An employee could choose to come to the office for like 3 out of 5 days in a week.

    The general rates which neither the employer nor the employee has to justify their amounts while reimbursing are :

    £6/week for weekly paid employees from 2020  £26/ month for monthly paid from 2020  

    If the employer does not pay the requisite amount, then, in that case, the employees can directly access the UK government’s website for application of relief. You can claim relief through form P87 or the special online microservice introduced by the government.

    After the approval, the automatic adjustment would be made in the salary figure with respect to the 2021-22 tax code. The adjusted relief will be received by the month of March in the year 2022.

    • The taxpayers are allowed to take relief on the rate at which they pay tax in sync with a specific amount per week.
    • Up till £6 per week; no evidence is required;
    • Tax relief of £7 per week at a standard rate of 20% would stand around £1.40 per week, which is 20% of their expense incurred on a weekly basis.
    • The amounts have also gone up to £2.40 per week in case of higher rate taxpayers.
    • The government has paid full attention to the employees that have missed the relief process last year due to some reasons. They have been allowed to claim up to 4 years. A lump sum amount will be credited eventually to them.

    5. Tax relief in case of self-assessment situation

    There have been a lot of cases where individuals can self-assess their income. They, however, are not eligible to claim the relief. Still, an allowance is allowed on the self-assessment form where you can enjoy the same benefits as enjoyed by people availing of the microservice.

    6.Tax relief in case of different expenses

    Uniform and work clothingUp to the amount incurred in repairing or replacing, or cleaning the clothing. No amount for the initial cost.  
    VehiclesClaims will be given up to the approved rate of mileage, inclusive of the cost of owning & running the vehicle—no separate claim of fuel, tax and repairs.  
    Professional feesAllowed if the fees or subscription is essential for the part of your job.  
    TravellingThe claim can be made for expenses like public transportation costs, food & drink, parking fees, tolls and business phone calls.  
    Buying equipmentYou can claim if the equipment has only professional use and has nothing to do with private use in general. Though, small items can be claimed differently.  

    7. Summing up all

    The government and the respective authorities have tried their best to make this pandemic a little relaxing by providing these provisions.

    Now, the execution lies on how well they turn out to claim their reliefs in sync with all needed requirements. Proper transparency and clarity is the key.

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