Work from home tax relief – how to claim up to £125 this year

Martin Lewis advises on claiming ‘work from home allowance’

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Under the Government’s current “Plan B”, all workers must work from home where possible. This may help to stop the spread of coronavirus, but the work from home order has meant many workers have faced extra costs such as higher electricity, internet and energy bills.

If you have been working from home during the pandemic, you might be eligible for a tax rebate worth up to £125 per tax year.

This relief is to compensate workers for the extra costs they faced as they were ordered to work from home.

While commuting costs may have fallen, HMCR recognises that overall most workers have faced higher bills as a result of working from home and so they are allowing you to claim tax relief for 2020 to 2021.

HMRC states that extra costs include heating, water bills, home contents insurance, business calls and a new internet connection.

Who is eligible for the tax relief?

  • To be eligible for this tax relief the following factors must apply to your situation:
  • You were told to work from home by your boss (those who optionally chose to work from home are not eligible)
  • You had to pay extra costs because you worked from home
  • You haven’t received any extra expenses from your employer to cover the cost of working from home
  • You aren’t paying tax by “self-assessment” or if you are self-employed — if this is the case you need to apply for your tax relief when you fill in your tax return

You can check your eligibility and apply for this tax relief via HMRC’s dedicated online portal here.

If your claim is approved, your tax code will be adjusted for the next tax year so you will pay less in tax to cover your increased bills.

You will then get a tax rebate through your salary. If you are a basic rate taxpayer this should amount to around an extra £5 a month.

How long do you have to work at home to be eligible?

You can make a claim even if you have only worked from home for just one day.

You don’t have to be working from home full time to apply for this tax relief.

If you didn’t apply for the tax relief last year but you worked from home then you are still eligible to apply for this today.

You can backdate your claims which means you could be entitled to up to a staggering £250 in tax relief.

How much relief will you get?

Either your employer can cover your extra costs and pay them into your wages tax-free or you can claim tax relief directly from HMRC instead.

You can either claim the exact amount of extra costs if you have evidence in the forms of receipts or contracts, or a basic rate of £6 a week.

The payments are based on the rate at which you pay tax. So for example, if you are on the basic tax rate of 20 percent and claim relief on £6 a week, you will receive £1.20 a week, which amounts to £62 annually.

Higher-rate taxpayers will get £2.40 a week, which equates to tax relief of 40 percent on £6, or £125 a year.

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