Tax Deductions for Working from Home

Tax Deductions for working from home are something we all need to understand in 2021. You may miss out on money that you can rightly claim.

Those who work at home on a regular basis are probably more than familiar with the idea of Tax Deductions for Working from Home, but what about those of us who suddenly find ourselves in this unfamiliar territory due to the coronavirus? After all, keeping that laptop and phone on charge all day isn’t cheap…so, are you entitled to claim tax deductions for working from home?

As soon as we start to spend extended periods at home, we start to see our household bills increase. Keeping our ‘home office’ running – even if it’s just a laptop and an iphone will add to our utility bills…as will having the lights and heating on more now that we are at home during the day, not to mention all the cups of coffee we have to make for ourselves now!

If you’re working at home for the first time due to the pandemic, you might be pleasantly surprised to know that there is a way to claim back some of those increased costs:

HMRC have said that they will look into claims made by employees who are working at home due to the coronavirus because their usual place of work is closed. Of course, working out how much it’s costing you can be tricky to work out, but a simple way is to claim the £6 a week that the HMRC are recommending.

How to make Tax Deductions for Working from Home?

Well, you have two options:

• Ask Your Employer For The Extra – Probably not the best timing due the fact that so many firms are struggling financially at the moment, but you could ask your employer for a tax-free allowance of £6 a week.

• Claim Tax Relief – If your employer isn’t up for that you could always ask that the amount be taken off your taxable income. To keep things easy, HMRC have said that claims of £6 a week won’t have to be justified, so you won’t have to muck about with receipts or provide other proof.

However, if you think that your costs are higher than £6 a week, and you want to claim for the full amount, you’ll need to provide evidence of these increased costs. 

Making A Claim

Ok let’s break this right down…

• If you normally fill in a self-assessment form you can claim the tax relief on that.

• If not, you will need to fill in a P87 form. You can either do this online if you have (or create) a Government Gateway account, or you can fill out a postal P87 form, which you’ll have to download from the HMRC website and print out.

• You’ll be asked for the name of your employer and job title, as well as your PAYE reference, which can be found on a wage slip or your P60.

• If you are filling in a P87 you will also need your National Insurance number.

The important section to fill on on the online P87 form is entitled, ‘Using Your Home As An Office’, and there are 2 boxes you’ll need to fill in:

1. Amount Paid By You – Put the amount that’s equivalent to £6 a week or the length of time you’ve been working from home. Remember, you won’t need to show receipts.

2. Amount Paid To You By Your Employer – If your employer hasn’t reimbursed you for any expenses you’ve incurred working from home, or paid you any sort of working from home allowance, you can just put £0.

• The postal version of the form is a little different – you’ll have to add ‘using my home as an office’ to the section entitled, ‘Other Expenses’.

• Once the claim is submitted you should hear back within a couple of weeks; as a rule it’s generally quicker if you have applied online.

Anything Else I Should Know?

Because you claim retrospectively on any expenses it’s best to wait until you’re back at your place of work, or at least been working from home for a few months, before you put in your claim.

It’s likely that your tax code will be adjusted so that over the year you will pay less tax, rather than you getting a cash refund.

I hope this is helpful for those who have been working from home and were starting to notice the extra costs involved. It’s worth keeping an eye on the HMRC website for any changes that might be made, as well as keeping yourself informed of any government schemes put in place during this pandemic that are designed to ensure you receive anything you might be entitled to.