Tax Relief

Labor prices and tax breaks

by David Watkinson www.watkinsonblack.co.uk

THE rules governing whether an employee can offset expenses against their taxable income and receive taxes are very strict.

In order to be tax-deductible, there must be an expense “entirely, exclusively and necessary” “in fulfillment of the tasks”. It is very difficult to meet these conditions. The main obstacles to be removed are:

  1. The effort may only relate to the employment. The common example is the use of a personal phone. If a business call is made on your home phone, the specific cost of the minutes used for that call is eligible. However, there is no entitlement to costs that would be incurred in every case, such as
  2. The effort must arise in the actual execution of the work. A common example is the travel costs between your place of residence and your usual place of work. These cannot be asserted, as the activity only begins when you arrive at your place of work and thus the costs arise in order to enable you to carry out your tasks. Training costs are also generally not reimbursable.
  3. It is not possible to choose whether the costs are incurred. If the services can be provided at no cost, there is a right to choose and the claim fails because the effort is not required. The common example is home expense claims when you choose to work from home.

To work from home, but is not always freely selectable. As of March 2020, it has been a state directive that you has to work from home if possible. This means that no choice is required and the cost can be claimed.

The HMRC is reminding taxpayers to submit tax breaks for working from home due to the coronavirus in the period 2021/22 via the user-friendly online portal

So far this tax year, more than 550,000 workers have benefited from the tax break, which is £ 6 per week for home workers. If employees have been instructed to work from home by their employer due to the coronavirus and as a result their household costs have increased, they are entitled to the tax reduction for working from home. HMRC has received more than three million requests for tax relief for the 2020/21 tax year.

Myrtle Lloyd, HMRC’s Director General of Customer Service, said: “Half a million people have already cut their income tax by as much as £ 125 this year by taking tax breaks on their work from home. “We want everyone to benefit, so we did it online quickly and easily. Check if you are eligible and apply on gov.uk by searching for “work from home tax breaks”. “HMRC continues to help and support people affected by the pandemic.”

You can find the online portal at https://www.gov.uk/tax-relief-for-employees/working-at-home

Starting April 6, 2020, employers will be able to pay up to £ 6 per week tax-free without the need for employees to show an increased bill. Employees who did not receive the cost of working from home directly from their employer can apply for tax relief from HMRC. If the employee wishes to claim more than £ 6 per week, they must provide evidence of the increased costs.

Eligible employees can claim tax relief based on the rate at which they pay tax. For example, if an employee pays the 20% property tax rate and claims a tax break of £ 6 per week, he receives £ 1.20 per week in tax relief (20% of £ 6 per week) on the cost of his household bills. Taxpayers with a higher tax rate would receive £ 2.40 per week (40% of £ 6 per week). Over the course of the year, this could mean taxpayers can cut the taxes they pay by £ 62.40 and £ 124.80, respectively.

As soon as an application has been approved, the online portal adjusts the person’s tax number for the tax year 2021/22. Until March 2022, they will receive the tax relief directly from their salary.

If employees had to work from home in the past year but didn’t take the tax break, they didn’t miss it; The HMRC accepts retrospective claims for up to four years. You will receive a lump sum payment for all successful retrospective claims.

Unfortunately, agents cannot use the online portal to request discharge on behalf of a customer. The taxpayer must make the claim personally.

Watkinson Black have extensive experience in all areas of taxation and business services including providing a very cost effective payroll service. If you would like to arrange a non-binding initial consultation on tax or accounting questions, please contact us. Our office is now open during all normal office hours. Please note that these ideas are for informational rather than advice, and you should always seek professional advice before taking any action.

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