Why work from home tax relief is being reviewed?

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Why work from home tax relief is being reviewed?

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 Why work from home tax relief is being reviewed?
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Highlights

The work from home tax relief could be closed in the UK after it cost Treasury around £500 million during the pandemic.

The terms and conditions were modified for the pandemic and lockdown period to support more workers.

The tax-free amount was raised to £6 a week from £4.

The UK government was giving tax relief to individuals who had to work from home due to the COVID-19 for the period between 2020 and 2022. Under this rule, individuals could claim £125 per annum for their expenses related to work. Recently, HM Revenue and Customs has said it will review this rule for eligibility and claim amount after it cost Treasury around £500 million during the pandemic.

The scheme was first introduced in 2003 and was adopted to help people with their electricity, gas, and internet bills. The terms and conditions were modified for the pandemic and lockdown period to support more workers.   

HMRC reported that it has got more than 4.9 million claims for the tax relief

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In the 2020-21 tax year, HMRC reported that it has got more than 4.9 million claims for the tax relief, which was expected to be around £2 million per annum year, but somehow increased to nearly £500 million in the last two years. At the start of the pandemic to support more workers, the amount was raised to £6 a week from £4.

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 The tax relief

The Working from Home Tax Relief was introduced in 2003 and was designed to support the workers using their own money for things that were required for official work, such as business phone calls, internet, metered water, gas, and electricity. The tax scheme was made temporary available till April 2021 and was later extended for another 12 months.

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The tax relief depends on what the workers have spent their money on and the rate at which they pay tax. If a worker has worked from home because of Covid that doesn’t make him eligible for the two-year payout of up to £250.

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Eligibility for tax relief

Everyone is not eligible for work from home tax relief until their employer has asked a worker to work from home and must pay higher costs related to their job. Claims for the last tax year can be paid with one’s salary.

Since 6 April 2020, employers were asked to pay a tax-free amount of up to £6 a week to their staff on providing proof of an increased bill due to work from home arrangement.

 Current status

A recent report from the Office for National Statistics (ONS) revealed that one in four or around 13.4 million adults were working from home for a week to 16 January 2022, which will cost the Treasury around £836.2 million. Experts feel that the Working from Home Tax Relief was introduced to help workers, but after the pandemic the take-up is much higher than expected and is an added burden for the Treasury.

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