Working from home tax break: beware the rule change!

Back in the days when the first COVID-19 lockdown took place in March 2020, employees were told to work from home where possible. To help with the extra costs incurred, HMRC allowed people to claim a special working from home tax break. We blogged about this back in October 2020, explaining the rules around claiming this tax relief.

In brief, the working from home tax relief was worth up to £62.50 for basic rate taxpayers. For higher rate taxpayers, it was worth up to £124.80.

However, while it’s still possible to claim the working from home tax break, it’s important to note that the rules have changed since the days of COVID.

How does the working from home tax break operate now?

Up until the beginning of the 2022/2023 tax year, you could claim the working from home tax break if your situation met all of the following criteria:

1. Your employer had not already paid your home working expenses
2. You had to work from home or self-isolate because of government guidelines or because your employer required it
3. Working from home resulted in additional household costs.

As you can see, these broad guidelines meant that millions of people were eligible for the tax break.

The guidance now, however, is much stricter. To qualify for the relief now, you still need to have additional household costs that are not paid by your employer. However, one of the following must also apply:

1. There are no appropriate facilities for you to perform your job at your employer’s premises
2. Your job requires you to live so far from your employer’s premises that you can’t reasonably travel to them on a daily basis
3. Government restrictions require you to work from home.

In other words, if working from home is your own choice, then you’ll no longer be eligible for the tax break. This will not only affect people who choose to work from home permanently, but also people who choose to mix home working with working at their employers’ premises. Of course, if the government introduces new restrictions that mean people have to work from home, then many more people will become eligible.

How can I check whether I’m eligible?

If you’re not sure whether you qualify for the working from home tax relief, HMRC has published an online checker. If you visit this page and answer a few questions, you’ll find out whether you are eligible. It’s important to get it right: HMRC warns that you can be prosecuted if you deliberately make a claim that you’re not entitled to.

I’m self-employed. Do I qualify?

If you’re self-employed and you work from home, you do not qualify for this relief. Instead you claim expenses via your Self-Assessment Tax Return. You can either claim the exact amounts (which requires proof of expenditure) or simplified expenses. The latter can be worth up to £26 per month if you work at home for 101 hours or more during each monthly period. If you’d like to learn more about how this scheme works, please get in touch with your THP account manager.