Personal Finance

How households working from home can claim £250 - but time is running out.

Find out how an HMRC tax break can save you £6 a week while you're forced to work from home.

With the cost of living soaring and wages stagnant while the UK recovers from the pandemic, Britons are looking for ways to positively impact their finances. And a little known tax break could save households £250 a year. But time is running out to claim.

If an employee is forced to work from home, HMRC allows a £6 a week tax relief for as long as they must stay there. This includes those who have been forced to work from home due to coronavirus.

The tax break does not apply if a worker chooses to work from home. But because so many were sent home from the office over the last two years, the government relaxed the qualifying criteria meaning millions of people are entitled to the payment—even if they only spent one day working remotely.

Plus, those who didn't apply in 2020 can still receive the rebate as a backdated payment.

The relief is based on the tax rate a person is on. If they pay basic rate tax of 20% it is a real-terms boost of £1.20 a week to their salary. For those on 40% tax it is £2.40. This may sound small-fry but when added up over the year it means up to a £125 boost to income. Every qualifying adult is entitled to make the claim, meaning a household with two working adults could save £250 a year.

Those who are extra diligent may be able to claim even more money, with the government allowing workers to claim for the extra gas, electricity, water and business phone call and internet costs incurred while working from home. However this is harder to do - receipts, bills or contracts must be shown to provide evidence, and only the part of the bill that relates to work can be claimed for. They also cannot be claimed for if the employer has paid expenses or an allowance for the added costs.

In comparison, it takes about five minutes to apply for the £6 a week rebate.

Time is running out to apply for the tax relief. HMRC is thought to be considering restricting the benefit after it was estimated to have cost the Treasury £500 million in lost tax revenue, compared to £2 million a year previously.

About 4.9 million people claimed the relief last year, HMRC said. But more than 13 million people were working from home in January 2022, according to the Office of National Statistics, meaning millions more pounds could be saved by hardworking Britons.

Despite the rebate being in place since 2003, pressure is now on to radically change eligibility.

A Treasury source told The Daily Telegraph: “This is a tax relief that existed before Covid and it was there for legitimate reasons, but the take-up is now much higher so it needs to be looked at.”

Tory MP Kevin Hollinrake, a member of the Commons Treasury Committee, told the newspaper: “It is often in people’s financial interests and personal interests to work from home, so it doesn’t seem appropriate that there should be tax relief.

“It’s important that we get people back to workplaces, rather than giving them any incentive to work from home."

However, with National Insurance due to rise 1.25% this year, among a number of other squeezes on finances, consumer experts have been pushing Britons to take up the offer while they still can.

An HMRC spokesman said: “Tax relief for working from home is there to help people with the additional household costs of having to work from home.

“It has been a key form of government support for millions of workers during the pandemic.”

To apply for the tax relief, visit the government's website. Applicants will need their National Insurance number, plus a recept payslip, P60 or valid UK passport.

Those who are self-employed and fill in a self-assessment form can also claim for the working from home benefit. They can claim for the current year here, and claim for previous years on their self-assessment form.

Erin Yurday

Erin Yurday is the Founder and Editor of NimbleFins. Prior to NimbleFins, she worked as an investment professional and as the finance expert in Stanford University's Graduate School of Business case writing team. Read more on LinkedIn.


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