Tax loophole allowing WFH staff to claim up to £125 a year for extra costs ‘will be closed after costing Treasury £500million during the pandemic’
A tax loophole allowing people working from home to claim for extra costs is set to be closed after it reportedly cost the Treasury nearly £500million during the pandemic.
HM Revenue and Customs is said to be reviewing the scheme which allows anyone who has worked just one day at home in a year to claim an annual sum of up to £125 in tax relief.
Before Covid, the scheme – which has existed since 2003 and is designed to help with the extra costs of home working such as internet, electricity and gas bills – cost the Treasury about £2million a year.
But at the beginning of the pandemic, when everyone had to work from home where possible, the rules were relaxed so that people no longer had to prove they worked from home regularly to claim.
Instead, working from home for just one day during the tax year was enough to claim the whole yearly sum.
Anyone who has worked just one day at home in a year can claim an annual sum in tax relief
The tax-free relief was also raised from £4 to £6. Over a year, this adds up to £62.40 for basic-rate payers and £124.80 for higher earners.
The update was due to end in April 2021 but was extended for a year. HMRC said 4.9 million successful claims for the tax break have been made since March 2020.
Martin Lewis, founder of MoneySavingExpert, has raised awareness of the scheme
The changes meant the cost rose to nearly half a billion pounds over the two years of the pandemic, The Daily Telegraph reported.
‘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,’ a Treasury source told the paper.
Consumer experts such as Martin Lewis, founder of MoneySavingExpert, have raised awareness of the scheme fuelling demand, while just days ago the Gov.uk Twitter account encouraged people to make a claim.
An 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.’