Making an expenses claim
If you’ve worked at home because of coronavirus you might have incurred extra costs for which you can claim a tax deduction. How do you make the claim and what happens after the tax year ends?EndFragment
Tax deductions or exemption
Where employees or directors work from home because their job requires them to, they are entitled to claim a tax deduction for household expenses incurred as a result (unless their employer reimburses them without deducting tax from the payment).
Employers can do this if they are satisfied that the employee would be entitled to a tax deduction if they didn’t reimburse them. HMRC statistics show that many employees aren’t claiming the tax deductions they’re entitled to.
Tip. If you’re working or have worked at home because of coronavirus, HMRC accepts that this is a requirement of your job and therefore you are entitled to a tax deduction for household expenses not covered by reimbursements made to you by your employer.
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Claims up but only by a little
While HMRC has reported a rise in claims for tax relief for homeworking expenses, it’s relatively modest compared with the number of people who are working at home because of the lockdown. One likely reason for this is that many employees and directors don’t know exactly what their expenses are before claiming.
Tip. Make a reasonable estimate of what you expect your homeworking expenses to be and ask HMRC to adjust your code to take them into account. The rules for what is and isn’t tax deductible are tricky so make sure you understand them before you make your calculation.
Claiming a deduction
There are different ways you can make a claim for expenses:
calling the tax office on 0300 200 3300
using your online Personal Tax Account
completing Form P87 and sending it to HMRC
writing a letter to HMRC setting out your expenses.
There are a few conditions that apply to the claim process for expenses.
After the end of the tax year
Having made a claim and received an amended tax code, that isn’t necessarily the end of the matter. If your estimate of expenses turns out to be too low or high you’ll pay too much or too little tax. In which case you’ll need to take further action depending on your circumstances.
Self-assessment: If you are required to complete a self-assessment tax return you must recalculate your figures and include the actual amount of homeworking expenses in the employment section of your return.
No Self-assessment: If your estimate of homeworking expenses was out by more than a little (see above) you should write to HMRC giving the actual figure for the year by 5 October following the end of the tax year. For the current tax year that’s 5 October 2021. It’s then up to HMRC to issue a simplified or informal tax assessment or ask you to complete a tax return.