Working at Home Tax Reliefs
If you have worked at home during 2020 you may be eligible for tax relief. Deductible payments are expenditure incurred by an individual for which he or she will receive tax relief. Tax relief will be obtained at the taxpayer’s marginal rate of income i.e. if you are a higher rate taxpayer, you will receive tax relief at a rate of 40%.
Deductible Tax payments
Below are various types of deductible payments for which you may be eligible to claim tax relief.
Work from home allowance
If you are required to work at home on a regular basis, for part or all of the week, then you will be eligible to claim the working from home allowance. The working from home allowance is designed to cover additional costs you may incur from working at home including heating, water bills or broadband costs.
For the 2020-21 tax year ONLY, the government has announced that you are only required to work at home for one day only since 6April, to be eligible to claim tax relief for the whole year. Tax relief can be claimed on £6 a week from 6 April 2020. For basic rate taxpayers (20%) that will result in a tax saving of £62 for the year.
HMRC has created a dedicated microservice whereby you can make the claim for tax relief without having to register for self-assessment. Its quick and simple to do so! (www.gov.uk/tax-relief-for-employees/working-at-home)
If you use your own vehicle to travel to work, then you may be able to claim tax relief for the business miles driven. This does not however include travelling to and from your usual place of work unless it’s a temporary workplace.
You can claim tax relief on the approved mileage rate. For cars in the 2020-21 tax year, the approved mileage rate is 45p for the first 10,000 business miles in the tax year (25p for each business mile over 10,000 in the tax year). The approved mileage rate is designed to cover the cost of owning and running your vehicle including fuel, road tax, repairs etc.
To make a claim for the tax year, you will need to keep records of your business miles,and deduct any amounts your employer contributes towards your costs.
Professional fees and subscriptions
You can claim tax relief on fees or subscriptions you pay to approved professional organisations, if you are required to be a member in order to do your job or if membership of the approved organisation is relevant to your job. Examples of approved organisations include the British Medical Association and the Institute of Chartered Accountants in England and Wales. For an exhaustive list of approved professional organisations please visit www.gov.uk/government/publications/professional-bodies-approved-for-tax-relief-list-3
Travel and overnight expenses
If you are required to travel for work, then you may be able to claim tax relief on the cost or money you’ve spent on food or overnight expenses including public transport costs, hotel accommodation, food and drink.
Interest paid by an individual on “qualifying loans” can be deducted from taxable income. The types of loan that qualify for tax relief include the following:
- Loans taken out by an employee to purchase plant and machinery for use in their employment e.g. laptops or printers.
- A loan taken out be an individual to purchase shares in a ‘close’ company. A ‘close’ company is a UK company controlled by five or fewer shareholders.
- A loan taken out by an individual to buy into a partnership will also qualify for tax relief.
Donations to charity
Individuals can receive tax relief for donations to UK registered charities. Donations made under a qualifying Gift Aid scheme are made net of 20% basic rate tax. For example, if an individual gives £800 to a charity, the charity can claim £200 back from HMRC, so that the charity receives £1,000 in total.
If you are a higher rate or additional rate taxpayer, then you are able to receive tax relief by extending your basic rate or higher rate bands by the gross charitable donation. Unfortunately, no additional tax relief is available for basic rate taxpayers.
If you believe you are eligible to claim tax relief on any of the above deductible expenses, then please visit the www.gov.uk/ website or for more advice, please speak to one of our tax specialists. We are more than happy to help.
Find out more
However, if you have any questions in the meantime, or would like to discuss the topics covered in more detail, please contact your local MHA member firm.