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Working From Home Tax Relief: The Ultimate Guide

7 min read

Since the pandemic, millions of workers in the UK have moved towards remote working from home, costing the Treasury nearly £500m in WFH tax breaks. As a result, the working from home tax relief rules are changing.

Now that the worst of the pandemic is over, the new regulations will only allow HRMC claims in specific circumstances. Due to these changes, not every employee working from home can claim this tax benefit as they did during the pandemic.  Workers can now only claim this tax relief if they met the conditions that existed before COVID-19

This update only includes people who don’t have the chance to decide to work from home and can’t attend the office because their employer can’t provide the facilities to do so.

In today’s guide, we’ll explore the different aspects of working from home tax relief, including: 

How Has the Pandemic Affected Work From Home Tax Policies?

The COVID-19 pandemic has had a significant impact on work from home tax policies in the UK. Before the pandemic, tax relief was only available for those who were required to work from home due to the nature of their job or the lack of suitable facilities. 

However, in response to the pandemic, the UK government introduced temporary changes to the rules to encourage people to work from home where possible.

For the 2020/21 and 2021/22 tax years, employees were able to claim tax relief on additional household costs incurred as a result of working from home due to COVID-19, even if they did not meet the usual eligibility criteria. This allowed a large number of workers to claim tax relief, with over 3 million claims made in the 2020/21 tax year alone.

Update on Remote Work Tax Relief Criteria

However, these temporary concessions came to an end on April 6, 2022. And now, the rules have returned to their pre-pandemic state. This means that tax relief is once again only available to those who must work remotely. But those who simply choose to do so are not eligible for this tax relief.

While this change may be disappointing for some workers who have been able to claim tax relief in the past, people teams need to understand the current rules to better manage virtual teams. It is also worth noting that while the temporary concessions have ended, employees are still able to backdate their claims. So it is worth checking if they are eligible to claim for previous tax years.


Who Is Eligible for Tax Relief on Working From Home?

According to Government reports, 30% of the UK workforce worked remotely at least once a week in 2022, and 8% of UK workers did not enter the office for the whole of 2021. But not all of those who are working remotely today are entitled to receive tax relief.

In order to be eligible for this benefit, employees must meet certain criteria. The crucial requirement for eligibility is that the employee had no choice but to work from home due to COVID-19. This means that if the employees had the option to work from home but this was not a requisite, they will not be eligible for the rebate.

To be eligible for the work from home tax relief, employees must meet the following criteria:

  • They must be required to work from home by their employer due to the pandemic, without having the choice to return to the office.
  •  They must not be reimbursed for additional household costs directly by their employer.
  •  They must incur additional household costs as a result of working from home, such as increased energy bills or internet costs.

Exceptions When Employees Might Still Be Entitled to Tax Relief

There are certain situations in which an employee may fit into the work from home tax relief, even if they do not meet the above criteria. These include:

  • If their job requires them to live far away from their office.
  •  If their employer does not have an office.
  •  If there are no appropriate facilities available for the employee to perform their job on the employer’s premises.

It is important to highlight that the work from home tax rebate is only available to employees who have not received expenses directly from their employer to cover the additional costs of working from home. Therefore, if the organisation managed the costs related to working from home, then employees can’t receive this tax benefit.

In the case of hybrid working models, where a team member works from home and the office on a regular basis, the eligibility for the rebate will depend on the specific circumstances of the work conditions.

If the employee must still work from home due to the COVID-19 pandemic and incurs additional costs as a result, they may be eligible for tax relief. However, if the staff chooses to work from home or has the option to do so, they will not be eligible for this benefit.

How to Claim Tax Relief on Working From Home

As HR managers and business owners, it is important to be aware of the updates in the work from home tax policies. This is how you can properly support and plan for remote teams. With the departments needing to adapt to the new post-pandemic workplace, it is likely that many employees will continue to work from home in the coming year.

According to HMRC’s guide, this is what your employees need to do to claim tax deductions:

  1. Check eligibility: The first step is to determine whether the worker is eligible to claim tax relief on home working expenses. Generally, team members are only eligible if they have been required to work from home due to circumstances such as living far from the office or their employer not having an office.
  2. Calculate the amount of tax relief: Workers can claim tax relief on either a fixed amount of £6 per week or the exact amount of their additional costs above this amount.
  3. Submit the claim: Once the employee has calculated the amount of tax relief they are entitled to, they can submit their claim through the HMRC online portal. They will need to create a Government Gateway ID if they do not already have one, which requires their National Insurance number and a form of ID.
  4. Receive tax relief: If the claim is approved, the employee’s tax code will be adjusted, and they will receive the tax relief directly through their salary.

It is important to note that workers can backdate tax claims up to 4 years for previous work. In this case, they will receive a lump sum payment for any successful backdated claims.


What’s Your Responsibility as an Employer Working With a Remote Team?

Access to remote work increases employee well-being, productivity, innovation, and inclusion. A recent report found that innovation increased by 63%, work engagement by 75% and organisational commitment by 68% in these instances. But still, what brings the future of work requires different strategies to keep the team working as it should.

As a people team manager, you must ensure that remote workers have the resources to carry out their job duties.

But providing the necessary equipment and resources is just the first step. Building a sense of community and connection within a remote team is also crucial for employee retention and job satisfaction. You can achieve this by holding regular check-ins, team meetings, and providing opportunities for social interaction and team building events.

According to a survey by FlexJobs, the top three reasons why people prefer to work remotely are related to having a better work-life balance and having more control over their work environment. However, feeling isolated and disconnected from the team was a major challenge for remote workers.

By fostering a sense of community, you can help your team to combat feelings of isolation and improve work motivation.

How to Support Your Remote Team

Some ways to support your remote team and build community include:

  • Providing regular opportunities for virtual team building and socialisation, such as virtual happy hours or team lunches.
  • Encouraging open and frequent communication, including regular check-ins and team meetings.
  • Offering support and resources for mental health and well-being.
  • Being flexible and understanding of the unique challenges that remote workers may face, such as balancing work and personal responsibilities or navigating time zone differences.
  • Provide training and resources to help team members understand their legal rights, including the work from home tax benefit. This not only helps them to claim what they are entitled to but also shows that you value their well-being and are willing to support them.
  • Encourage the use of collaboration tools and platforms that facilitate communication and teamwork. This can help to foster a sense of connection and inclusivity.
  • Consider offering additional employee benefits that are specific to remote workers, such as reimbursements for home office expenses or subscriptions to productivity tools.
  • Be proactive in addressing any challenges or issues that may arise for remote team members. This could include providing support for technical difficulties or offering flexible work arrangements to accommodate personal circumstances.

Overall, as a remote team manager, it is important to provide the necessary equipment and resources. But also to create a sense of community and connection, and to prioritise the health and safety of your employees. By doing so, you can help to retain top talent and ensure the success of your team.


How to Use Factorial to Effectively Manage a Remote Team

One of the biggest challenges of managing a remote team is staying organised and on top of tasks. But here’s Factorial to help with that. You can support your employees in claiming tax benefits and also provide the necessary equipment to work from home.

Here are some ways that Factorial remote work software can help you manage your virtual team:

Time Tracking

Use Factorial’s time-tracking software to ensure that your employees are registering their hours and keeping up to date. This can be done through the computer or mobile app, and even includes a geolocation clock-in to know where your employees are working.

Document Management

Keep all of your company documents organised and easily accessible with Factorial’s document management system. You can store, ship, organise, edit, and approve all types of documents, and even use the electronic signature feature for legal documents.

Time Off Management

Easily monitor who is in the office and who is away with Factorial’s time-off management solution. View all teams and absence types in one place and use the one-click holiday management feature to easily track employee absences.

Internal Communications

Use Factorial’s HR software to effectively communicate with your remote team and keep them informed about important news and company safety measures.

Employee Performance Monitoring

Keep track of your team’s performance with Factorial’s automated and personalised assessments. Use notifications and questionnaires to stay up to date on employee progress and assign tasks to ensure that your team is staying on track.

Hiring and Onboarding

Even while working remotely, you can still hire and onboard new employees with Factorial’s hiring and onboarding tools. Customise the steps in the process and use the applicant tracking system to manage your selection and recruitment process.

In addition to these features, Factorial also offers a fully personalised dashboard and integrations with job portals. This makes it easy to attract top talent and offer remote working positions.

Overall, Factorial is a valuable tool for managing a remote team and ensuring that your employees can claim tax benefits. With its various features and integrations, it can help streamline your HR processes and keep your team organised and efficient.

👉 Start now and try it for free for 14 days.

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