Working from home tax relief explained

When employees are asked to work from home, their expenses are likely to increase due to additional use of things like electricity, heating and the internet. If you were legally obliged to work from home during the coronavirus pandemic, you may be eligible for some tax relief. However, the government has changed the criteria for 2024/25. In this article, you’ll learn what working from home tax relief is, if you’re eligible and how you can claim it.

Working from home tax relief is offered to employees who are asked to work from home by their employers. From 6th April 2020, you could claim tax relief on £6 a week to cover any additional costs you incurred by having to work from home. 

However, now you can only claim working from home tax relief if your employer hasn’t already covered your additional extra expenses. It’s also worth noting that the rules are much stricter for 2024/25 due to many employees now working from home full or part-time, and, as a result, many people who were previously able to claim working from home tax relief during the pandemic can no longer do so.

To be eligible for tax relief, you must be carrying out your work at home. This means you must be able to show that your home is your workplace. HMRC will accept that your home is a workplace if you are performing substantive duties from your home, and these duties must be related to your current work. 

You can only claim working from home tax relief for the current 2024/25 tax year if your job requires you to live far away from your office or your employer does not have an office. You won’t be able to claim working from home tax relief if you’ve agreed with your employer that you’ll voluntarily work from home. If you’ve chosen to carry on working from home on a full or part-time basis following the pandemic, you won’t be able to claim tax relief for 2024/25 onwards (even if it’s written into your employment contract).

You can check whether you’re entitled to claim working from home tax relief on the gov.uk website.

There are two ways you can claim when working from home.

1.   Your employer pays you £6 a week to cover additional costs you may incur. Many employers offer this allowance, which is free from tax.
2.   Should your employer choose not to cover your extra expenses, you can ask for them to be deducted from your taxable income. To make the process of claiming easier, HMRC has said that you won’t need to justify the figure by keeping receipts as proof.

You can make a claim on all additional expenses, such as electricity, water (if metered) and heat. If you were working from home due to the coronavirus pandemic in the 2020/21 and 2021/22 tax years but failed to apply for tax relief, you can still apply to have your claim backdated. If you meet the criteria, HMRC will issue a tax refund.

Following a tightening of the rules in April 2022, many people are no longer eligible to claim tax relief for the current tax year. However, if you are still eligible to receive working from home tax relief, your tax code will be adjusted so you’ll pay less tax.

The government allowed this tax relief during a time where many people had no choice but to work from home, due to the pandemic. However, in 2024, many people now work from home full or part time, making it more expensive for the government to allow this tax relief on an ongoing basis. Therefore, HRMC has warned that employers who simply tell their employees to work from home will likely not be sufficient to claim tax relief – you can only claim tax relief if there is a lack of appropriate facilities on your employer’s premises to do your job, or you don’t have an office to go to.

The amount of tax relief you’re entitled to depends on your rate of income tax:

• Basic rate (20%) taxpayers are entitled to tax relief equivalent to £1.20 a week (20% of £6). This equates to £62.40 per tax year.
• Higher rate (40%) taxpayers receive tax relief of £2.40 a week (40% of £6) or £124.80 per tax year
• Additional rate (45%) taxpayers can receive working from home tax relief worth £2.70 a week (45% of £6), which is equal to £140.40 per tax year.

If you normally file a self-assessment tax return, you can make a claim there. Alternatively, you may be able to use the working from home microservice, which was set up by the government in October 2020. You can also fill in a P87 form if you need to claim for higher amounts. This form can be filled in online through the UK Government website**, or by filling in a postal P87 form. Some information you’ll need to include if you return this form by post is as follows:

• Employer’s name
• PAYE reference
• Job title
• National insurance number
• That you’re using your home as an office
• A list of your expenses

If you complete your P87 online, you’ll need to complete two sections as follows:

• The amount paid by you, which is £6 per week for the period you’ve been working from home
• The amount paid to you by your employer. If your employer isn’t paying you a working from home allowance or reimbursing your additional expenses, this will be £0

If you’re eligible to receive a working from home tax rebate for previous tax years, HMRC will normally issue a cheque for the amount owed. If you’re one of the few people who are still entitled to claim working from tax relief in the current tax year, HMRC will adjust your tax code so you’ll pay less tax on your wages.