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Working From Home?

We've all done it, and expected/received some tax relief for it.

Things will change for the 2022/23 tax year we suspect.

WORKING FROM HOME – ‘generous’ tax allowance

A work from home tax loophole is set to be reviewed urgently after officials warned Rishi Sunak that it may have cost the Treasury nearly £500 million during the pandemic.

What the Civil Servants screwed up is that if you work from home at all during a tax year you can claim the allowance as a single figure, not (as you would have thought) apportioned over the number of days at home/office/holiday/pub etc.

For example no one works every day of the year 365 days, so logically if the allowance is £6/week no one can claim it in full e.g. 48 weeks is likely maximum x maybe 3 out of 5 days WFH in last tax year might equal £172.80 claim tax relief at 20%=£34.56 HMRC chip in to the extra costs of WFH.

Of course, some may view this is less than generous as a tax relief anyway - considering that even modest amounts of WFH requires a chair/ table/ juice to make your laptop go/ wifi/ something to stop your teeth chattering/ black coffee to stay awake/ post-it note for the camera etc.

We quote below a recent Press item:-

The Telegraph article

HM Revenue and Customs is urgently reviewing a rule that allows anyone who works even a single day from home to claim a yearly sum of up to £125 in tax relief, The Telegraph can disclose.

The tax relief scheme for home workers has been in place since 2003 and is designed to help with the extra costs related to working from home, including electricity, gas and internet bills.

However, the rules were relaxed at the beginning of the pandemic to help the millions more people told to stay away from the workplace - with the tax-free amount raised from £4 a week to £6.

Instead of needing to prove they worked from home regularly, claimants were also told they could claim the full yearly sum - even if they had been told to work from home for a single day during the tax year.

The updated scheme was originally intended as a temporary measure to end in April 2021, but was then extended for 12 months. Claims can also be backdated, meaning that anyone eligible who worked from home because of Covid but never made a claim is entitled to a two-year payout of up to £250.

A HMRC spokesman said at the time: “We recognise that the working from home situation is very fluid this year and so we’re accepting claims for the full year’s expenses, even if people have only worked from home for some of the year.”

However, the cost to the Treasury is understood to have spiralled from approximately £2 million a year before Covid to nearly £500 million across the two years of the pandemic.

HMRC said 4.9 million successful claims for the tax break had been made since March 2020.

Bosses of companies that rely on trade from office workers described the tax break as a “recipe for endless home working”, after government guidance to work from home ended last week.

MPs questioned the wisdom of rewarding workers for staying at home, when many have already saved hundreds of pounds a month on train fares and other costs.

Now The Telegraph has learnt that HMRC is compiling a report for the Chancellor, which is expected to lead to changes to who is eligible for the tax relief and how much can be claimed.

A Treasury source said: “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.”

The Office for Budget Responsibility suggested in 2020 that the scheme’s cost to the taxpayer would rise 12-fold, from around £2 million a year to £25 million.

However, figures obtained by The Telegraph show that this was dwarfed by the ultimate cost of nearly £500 million over the two years.

Telegraph analysis suggests the cost to the Treasury since March 2020 was at least £348.6 million, but the true figure is understood to be closer to £500 million because workers can backdate their claims for the past four years.

The latest figures from the Office for National Statistics showed that one in four adults reported working from home in the seven days to January 16 2022 – equivalent to 13.4 million people.

Even if all were on the basic rate of tax, the scheme carries a potential cost to the taxpayer of £836.2 million.

Demand for the tax break is also believed to have been driven by consumer experts, who have revealed the existence of the scheme to those who may not have previously been aware.

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.”

With thanks to ©

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