Working from home tax relief worth £125 a year ‘to be axed’ as rule faces review

A tax break for people who work from home could be axed following a review.

The tax relief was introduced to help workers cover the costs of energy and internet bills and was extended during the pandemic when people were told to work from home where possible.

The rule allows anyone who works from home to claim up to £125 a year in tax relief, even if they only worked at home for a single day.

The scheme was initially intended to be a temporary measure and was due to end in April 2021, but was then extended for a further 12 months.

Workers can also backdate claims, meaning anyone who worked from home due to Covid-19 and never made a claim is entitled to a two-year payout of up to £250.

HMRC said a total of 4.9 million successful claims for the tax relief had been made since March 2020.

Myrtle Lloyd, HMRC’s director general for customer services, encouraged people to claim the money as recently as June 2021.

He said: “More people are getting back to office working now, but it’s not too late to apply for tax relief on household expenses if they’ve been working from home during the pandemic.”

Policy ‘under review’

HM Revenue and Customs has now reportedly launched an urgent review of the policy after officials warned the Chancellor that it had cost the Treasury almost £500 million during the pandemic, according to The Telegraph.

HMRC is said to be compiling a report for Rishi Sunak which could lead to changes as to who is eligible to claim the tax relief and how much can be claimed.

An unnamed source told the paper: “This is a tax relief that existed before Covid and it was there for legitimate reasons, but the take-up is now much higher so it needs to be looked at.”

Conservative MP Kevin Hollinrake, a member of the Commons Treasury Committee, was quoted in The Telegraph as saying: “It is often in people’s financial interests and personal interests to work from home, so it doesn’t seem appropriate that there should be tax relief for those who choose to work from home rather than being forced to do so.

“It’s important that we get people back to workplaces, rather than giving them any incentive to work from home.

“Lots of businesses rely on those people being at work, and it’s good for people to be at work because that’s where you learn.

“So for societal and economic reasons, it doesn’t make sense to have a tax break.”

A HMRC spokesman said: “Tax relief for working from home is there to help people with the additional household costs of having to work from home.

“It has been a key form of government support for millions of workers during the pandemic.”

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