Tax relief review

The government is reviewing the tax relief which allows employees to claim up to £125 a year if they work from home after it has cost the taxpayer £500m over the course of the pandemic.

According to HMRC, since March 2020 the tax relief has cost the Exchequer around £348.6m however the true figure could possibly be closer to £500m as workers can backdate their claims for the past four years.

In the 2020-21 tax year, 4.9m people successfully claimed the relief, and according to statistics from the Office for National Statistics (ONS) 13.4m people were working from home up to 16 January 2022 when the government lifted the work from home guidance.

The relief was introduced in 2003 to help home workers with gas, heating, internet, and other utility bills but this had to be proven by the employee in order to claim.

At the start of the pandemic when the work from home order was passed, the rules for the scheme were relaxed so that people no longer had to prove they worked from home regularly to claim. In addition, claimants were eligible for the full tax break meaning that working from home for just one day during the tax year was enough to claim the whole yearly sum.

The tax-free relief was also raised from £4 to £6 a week. Over a year, this adds up to £62.40 for basic rate payers and £124.80 for higher earners. It was due to finish in April 2021, but it was then extended for a further 12 months.

In the last year, many MPs have come forward and criticised the relief stating that many people had actually saved money from working from home and that the Treasury needed to harness all the extra money it could.

Read more articles relating to tax relief here.

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