Employees can be paid £6 a week tax free Home Working Allowance whilst working from home.
The amounts are free from income tax and Class 1 national insurance contributions (‘EEs and ‘ERs).
The normal rule to take advantage of this exemption is that the employee is required by their employer to work from home from time to time and is normally not available where the employee works from home as a matter of choice.
£6 a week tax free for a higher rate taxpayer is equivalent to £538 gross pay (after 40% income tax and 2% employee NICs). The employer would also save 13.8% NICs.
This rule was temporarily relaxed due to the COVID-19 pandemic for 2020/21.
HMRC have advised that as long as an employee has been required to work from home at some point during 2020/21 as a result of the COVID19 pandemic they will accept a claim for home-working for the whole 2020/21 tax year. This has now been extended to 2021/22 up until the end of the pandemic.
Where the employer does not pay the allowance, the employee may make a claim for a deduction of £6 a week from their earnings and this has also been extended to 2021/22. That would result in a tax refund of £124.80 for a higher rate taxpayer.
The quickest way to make a claim is to use the HMRC online claims service which requires the employee to set up a Government Gateway account.
Alternatively, employees should use HMRC form P87 to make their claim.
If you require further details on this or any tax matter please contact our tax manager Nick Charnley on 01244 343504.
Ellis & Co Chartered Accountants and Business Advisers, Chester & Wrexham - 01244 343504, firstname.lastname@example.org