Home Office Tax Relief Might Burden You This Year

Are you one of those who have been claiming Home Office Tax Relief during the Covid 19? If yes, then you might need to immediately review your tax codes to check whether HMRC has included the relief in your notice of coding.

But wait, what is this Home Office Tax Relief first?

While we were battling the pandemic, the majority of firms decided to permit remote working. Most employees accepted this change while many others weren’t happy with it. Working remotely had its own set of difficulties and extra costs for the employees. For instance, many employees had to pay extra to ensure there was always electricity and a high-speed internet connection. Other expenses included an ergonomic work chair, stationery, a maid in case there was no creche, air conditioning, etc.

Consequently, some businesses made the decision to forgo any form of complexity or administrative burden and instead gave employees reimbursement for any costs associated with working remotely. Meanwhile, some decided to provide reimbursement of costs for specific things. For example, office tables, ergonomic chairs, UPS systems, monitors, etc.

On the other hand, the Government made efforts to ease taxation for such employees. As a result, Home Office Tax Relief came into effect which allowed employees to claim relief for extra household costs while working from home. Workers were eligible for the tax break if their employers required them to work from home rather than letting them choose to do so. Besides, it was available to those candidates whom the company did not reimburse for living expenses.

How did it help employees?

It was, no doubt, a popular tax break that gave many people financial support during the pandemic. The working from home tax benefit was established approximately 20 years before the pandemic. However, the government loosened the regulations in 2020. As a result, millions of workers who had to work from home during lockdowns were suddenly eligible to claim tax relief worth up to £125 annually.

HMRC even launched an online portal to help employees. Through this, they could claim without having to submit receipts or perform laborious calculations. Additionally, eligible workers could claim a full year’s worth of benefits even if they only had to work from home one day during the tax year. This made things even simpler.

Moreover, it is maybe not a surprise that it has been a well-liked tax break. According to sources, millions of individuals have successfully applied for it. It has driven up the cost of the assistance from roughly £2 million per year before the Covid crisis to about £500 million over the course of the pandemic’s two years. It’s likely that most employees even thought they could simply make another claim. However, this isn’t the case now.

HMRC’s Home Office Tax Relief is harder to claim now 

Given that millions of people are returning to the office, HMRC has recently updated the guidelines for remote working tax relief. Therefore, you might not be eligible to claim the tax reduction now. In other words, experts say, now you can only claim a tax credit if you meet tight requirements.

According to tax specialists, there’s no change in the laws. However, most people’s circumstances have improved due to Covid limitations being gradually relaxed. So, it is obvious that you cannot claim relief if working from home involves some degree of choice. And thus, HMRC has changed the instructions.

According to Joanne Walker, a technical officer with the Low Incomes Tax Reform Group, the regulations were relaxed in favor of employees for 2020–2021 and 2022–2023. However, as of April of this year, HMRC was once again abiding by the laws to the letter.

As with Covid, she claims that to be eligible for the tax break, a person must meet the requirements outlined in HMRC’s Employment Income Manual 32760. These regulations are fairly rigorous. For example, you must typically not have access to any workspace on the property of your employer.

But, how can your Home Office Tax Relief cause you to pay more this year?

There are chances that you might end up paying more this year if HMRC has added the tax within your notice of coding. Therefore, according to Robert Salter, client tax director at renowned tax firm Blick Rothenberg, employees should check their PAYE tax codes as soon as possible.

If this is the case, they should get in touch with HMRC to have the notice of coding changed. Or if they are still qualified for the relief in 2022–2023, no change is needed. Otherwise, they will owe more money in taxes at the conclusion of the tax year.

A result of relaxed Covid situations

For the UK tax years 2020-2021, 2022-2022, and 2022-2023, Robert continued, “The Government modified the restrictions regarding home office working and the related eligibility for claiming it. Since they only needed to work from home for a brief period during each of these tax years, people can really claim the full £6 per week tax deduction for each of these tax years thanks to Covid. For example, if your business obliged you to work from home for a few weeks during certain lockdowns, you might claim tax relief of £312 for the entire year (52 weeks x £6 per week). Or you aren’t eligible if your employer paid for the costs of your home office.

However, Robert noted that HMRC had only temporarily loosened the restrictions. Therefore, the home office relief will only be accessible starting on April 6, 2022. Moreover, it’ll be only available if your employer expressly demands that you work from home. For example, to stop the spread of Covid or if your job has been “relocated”. Or if your job is now 100% contractually a home office role.

Robert added, “Your employer simply now permits staff to work flexibly. Here, flexibility can mean being in the office or working from home as it suits each individual. In this case, the home office relief ceases to be available for the 2022–2023 tax year. So, there is no tax relief available for the costs which one incurs from working from home in this situation.