HMRC, the UK’s tax authority, has introduced significant changes to the use of home as an office space for the 2021/22 tax year. These adjustments, in response to the COVID-19 pandemic and the increase in remote work, impact employee expenses and benefits. Let’s delve into the details of HMRC’s use of home allowance for the 2021/22 tax year.
HMRC has expanded the eligible expenses for working from home, acknowledging the significant shift towards remote work due to the pandemic. This expansion aims to provide relief to employees who have had to set up home offices to carry out their duties.
What is the Home as Office Expenses Scheme?
The Home as Office Expenses Scheme is a provision by HMRC that allows employees to claim back expenses incurred as a result of working from home. This scheme has been extended and enhanced for the 2021/22 tax year, with key changes that affect both employees and employers.
Under this scheme, employees can claim tax relief on household expenses incurred due to working from home. The amount of tax relief depends on the hours worked from home and the associated costs.
Eligible Expenses
The eligible home as office expenses are considered reasonable additional costs incurred by the employee due to working from home. These include bills for heating, electricity, and other utility costs, as well as the cost of office equipment such as computers, printers, and desks.
Employees can claim a flat rate deduction based on the hours worked from home. This rate was increased for 2021/22 to £6 per week or £312 for the year. Alternatively, they can claim actual costs, which would need to be supported by evidence.
Employer’s Role
Employers are not required to pay for these homeworking expenses, but they can choose to reimburse employees for these costs without creating a taxable benefit. Employers can claim tax relief on the amount they pay to reimburse employees, as long as it doesn’t exceed the amount the employee would have been entitled to claim.
To claim tax relief, employers must keep records of expenses paid out, including the name of the employee, the amount paid, and the fact that it was to reimburse homeworking expenses.
Changes to the Home as Office Allowance for 2021/22
For the 2021/22 tax year, HMRC has made significant changes to the home as office allowance. These changes include an increase in the flat rate deduction and the introduction of a new simplified process for claiming expenses.
One notable change is the introduction of a new flat rate deduction table for employees working varied hours. This table provides higher rates for employees working more than 25 hours a month from home.
New Flat Rate Deductions
The new flat rate deductions for the 2021/22 tax year are as follows:
- Working 1-25 hours a month: £1.20 per month
- Working 26-30 hours a month: £2.40 per month
- Working 31-35 hours a month: £3.60 per month
- Working 36 hours or more: £6.00 per month
These rates account for the increased costs of working from home due to the pandemic.
Simplified Expenses Claims
HMRC has simplified the process for claiming home as office expenses for the 2021/22 tax year. Employees can claim a flat rate deduction without needing to provide evidence of their expenses. However, they must keep a record of their working from home arrangements in case HMRC requests it.
Employers also have a simplified process for reimbursing homeworking expenses. They can pay employees up to £6 per week or £312 per year without needing to keep detailed records of the amount paid.
In light of these changes, it’s crucial for employees and employers to understand the new rules andhow they can claim tax relief on home as office expenses. This understanding will help ensure that workers receive the support they need while also protecting their tax positions.
