This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice please consult us here at Elmfield Financial Planning in Padiham, Burnley, Lancashire.
COVID-19 restrictions have become a defining feature of life since early 2020. Hopefully, 2022 will witness greater normality. Yet it remains possible that, as the government seeks to control various “spikes” or “waves” of the virus, work-from-home orders (or encouragement) are issued. Many people are unaware, however, of the tax reliefs available to them when working remotely. Below, we share some information which could help you save on your tax bill.
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T: 01282 772938
Home working: HMRC overview
If you need to work from home on a regular basis – including due to COVID-19 restrictions – then you can claim tax relief to help mitigate the impact on your household costs.
Bear in mind that this is not available to you if you can decide to go into work. However, those eligible can claim tax relief for phone calls (including internet access), metered water, gas and electricity. You cannot pass all of these costs onto the government – only those which can be reasonably attributed to your work activities.
Tax relief rules
For a Higher Rate taxpayer, these rules could amount to over £120 per year. However, only 1.6m people have claimed the relief so far in 2021-22 (3.1m claimed it in 2020-21, out of 5m who were eligible). The UK government has said that home working tax relief will be available until the end of the tax year – i.e. April 2022 – and there could even be an extension.
Clearly, not everyone is taking advantage of the tax relief available to them. It is especially vital to do so as the cost of living rises (5.1% inflation in December 2021 – the highest in 10 years). Here is a general picture of how this works:
- You can claim tax relief on £6 per week (no evidence required).
- Or, you can claim it on the precise amount above £6 per week. Here, you will need to provide evidence such as receipts.
Tax relief is based on your highest income tax rate. So, Basic Rate taxpayers get 20% on £6 (i.e. £1.20) if they go for the first option above. Someone on the Higher Rate, however, would get 40% tax relief – e.g. £2.40. If the latter person did this every week of the year (52 weeks), then it could total over £120.
Watch out for creeping costs
Without a careful watch on home working expenses, these could easily erode your disposable income without realising. For instance, you may need to pay for the repair or replacement of work tools such as computer equipment, electric drills or work phones. Uniforms or safety boots may need to be professionally cleaned. These bills can add up over time, but you may be able to claim tax relief for them (although you cannot claim for the initial purchase cost).
Those using vehicles for work may also be able to claim tax relief on the approved mileage rate (AMR) – although you cannot claim separately for the likes of MOTs, road tax and repairs. You also may not claim for journeys to and from your workplace. For cars and vans, the AMR for 2021-22 is 45p for the first 10,000 business miles and 25p thereafter.
Bear in mind that you may not be able to claim depending on whether you bought/leased the vehicle(s) yourself, or if your employer owns it. You will need to keep careful records of your mileage and subtract any mileage allowance provided by your employer.
Planning tips
Of course, it can be burdensome to imagine yourself storing up hundreds of paper receipts to claim tax relief. However, there are some excellent “tracker apps” and software solutions which you can use to manage this digitally. Often, this involves simply taking a picture of the receipt – letting you store everything easily on the cloud.
Alternatively, keep a folder in your car for fuel receipts, also making sure these can be fastened securely in order of date. You could also keep a separate, portable folder for other expense receipts in your home working space. Whatever system you use, however, consider storing the invoice/receipt as soon as you get it, so you do not forget or misplace it later.
A final thing to consider is professional fees and subscriptions which may be involved with your job (e.g. annual fees to professional bodies which are required for your role). Whilst you cannot claim tax relief on lifetime subscriptions or memberships, you may be able to do so if you pay for other work-related subscriptions. If your employer has paid for these, however, you will likely not be able to claim. Consult your organisation for guidance, if you are unsure.
Invitation
If you are interested in starting a conversation about your own financial plan or investments, then we’d love to hear from you. Please contact us to arrange a free, no-commitment consultation with a member of our team here at Elmfield Financial Planning in Padiham, Burnley, Lancashire.
Reach us via:
T: 01282 772938
