In October of last year, the government introduced a new tax relief scheme for those who were being forced to work at home due to the coronavirus in the hope of alleviating some of the added financial costs the individual would incur on their bills (electricity and heating from being in the house all day etc.). At the time, this scheme seems to go under the radar; indeed, despite millions of us working from home it was estimated that only 60,000 people have taken advantage of the scheme. This is possibly due to the fact that the tax relief would only come in the form of a very nominal sum. However, since the second lockdown in the UK is forcing most to work from home for the foreseeable future, the scheme is definitely worth reconsidering.
How Much Could You Stand To Earn?
The first way in which those who have been forced to work from home can receive tax relief is from the added amount they will have to pay on their bills. The government has calculated that individuals will have had to pay about £6 a week extra on bills, and thus individuals can claim back the tax on this £6.
Please note that this does not mean you will be entitled to a refund of £6 a week. Rather, you will be entitled to the tax you would have paid on that £6 according to your tax bracket. For example, if you earn between £12,500 and £50,000 you would receive 20% of the £6 a week (£1.20).
Also you don’t receive the refund in the form of a payment. Instead, the amount just gets added to your pay check for the required amount of months (or, more specifically, it is deducted from the tax you would normally pay when you receive your pay check.
You can theoretically receive more if you are able to show that the costs you have incurred are actually more than £6. However, this would require you show receipts and prove the incurred costs.
The relief up to £6 requires no receipts.
Can You Claim On Any Equipment You Had To Buy To Work From Home?
The short answer is yes. If you have bought equipment in order to work from home you can claim tax relief on these purchases from the government. However, unlike the application for the tax relief on your bills, to benefit from this tax relief you must be able to show receipts.
Furthermore, the items you apply for tax relief on must be used exclusively for working from home. For example, if you buy a dining table which you happen to work on, this will not qualify. However, if you buy a desk that is specifically for use of working on then this would be acceptable. Tax relief is available up to a maximum of £2,500.
If you are an employer and you have reimbursed your employee for any equipment they were required to buy then you may claim tax relief on the money you paid to your employee.
In order to be eligible for either of these schemes you have to have been forced to work from home by your employer as a result of the coronavirus pandemic. If you have merely chosen to work from home voluntarily you will not be eligible to either scheme.
How To Apply
Both these schemes are remarkably easy to apply to. You will need a government gateway ID to begin the applications. One of these can usually take about 5-10 minutes to create and you will likely benefit from having a pay slip or passport to hand in order to complete the registration.
This being done, you will simply have to answer a few questions before completing the application for tax relief on your bills; these questions are simple, such as do you complete self-assessment returns and has your employer paid you working from home expenses, and you simply tick yes or no.
You will then be taken to the application which takes about 2 minutes to fill in. Please note that you must complete this application for yourself only, nobody else can apply on your behalf.
A similar process is required for the tax reimbursement on equipment you have had to buy, but the questions vary slightly. Before completing your application you will be asked as to whether you paid tax in the year for which you are claiming the expenses, and also whether your employer has reimbursed you at all.
Please be aware that neither of these schemes are applicable to you are furloughed, and thus using the government’s job retention scheme.
Whilst many may have ignored these schemes before since the amount seemed insignificant, it is impossible to know how long the lockdowns and restrictions will be in place. By applying to either of these schemes, you could stand to save £100s in tax over the next couple of years.
If you need any help with any of the government schemes, or you are interested in inventive ways to save money in the midst of the coronavirus and Brexit, we can help you.
J&P is a registered accounting firm in the UK. We have the qualifications and strength to help you plan ahead, so please do not hesitate to get in touch should you have any further questions about this policy, or if you need any help with your applications to register for VAT.