As we are all working at home these days and perhaps for some time to come, not everyone is aware of what costs can be incurred or indeed what entitlements are available.
Most self-employed people are well aware of their right to reclaim partial costs by working from home; for example phone and broadband, electricity and heat.
You would imagine this should apply to all at home workers too, but does it?
Tax-free expense
Currently, there is a tax-free expense of €3.20 per day that can be paid by employers to employees, but according to research carried out recently, only 5% of employers are making this payment.
This is an allowable expense by Revenue once duties are being performed within normal working hours.
At €16 per week, this can amount to quite a sum over a 12-month period.
As few employers are not paying this expense and are not legally obliged to, the main reason may be the employers are financially stretched themselves or are simply unaware of the allowable expense.
But employees have an alternative - they can claim e-workers tax relief.
Tax relief
It was announced in Budget 2021 that certain expenses will be considered allowable home expenses for people working at home called e-working tax relief.
This is applicable to the tax year 2020 and applies for the duration of the COVID-19 pandemic:
30% of broadband costs for days worked at home.Other vouched expenses where they are ‘wholly’, exclusively and ‘necessarily’ part of your work.E-working is a term attributed to anyone who works from home on a full- or part-time basis, who has a formal agreement with their employer requiring them to work from home, performing essential duties of employment.
You are not entitled to claim tax relief if you bring work home from the office outside normal working hours.
If your employer does not pay an allowance for your expenses, you can make a claim for e-workers tax relief at year end.
Your refund of tax will be based on:
How many days you worked from home.The cost of the expenses and Revenue’s agreed rate for calculating the cost of running a home office.You can claim 10% of the total cost of electricity and heating bills against your taxes.
You can claim 30% of broadband costs for tax year 2020 and this applies for the duration of the COVID-19 pandemic.
You can only claim for the days that you actually work from home.
Tom works from home for 180 working days, as his place of work is closed due to COVID-19.
His household bills for heating and electricity for 180 days is €1,400 and broadband over this time costs €500.
To calculate the tax amount reclaimable, multiply €1,400 (the cost) x 180 days = €252,000 and divide by 365 = €690.
Using the 10% allowable, this amounts to a claim of €69.
Using the same method to calculate the broadband cost amounts to €74 reclaimable.
A total of €143 can now be claimed by Tom for his year-end tax return.
The amount he receives back will depend on the rate of tax he currently pays, either 20% or 40%.
Tax relief can be claimed online using Revenue’s MyAccount service.
This may seem like very little, but, as the old saying goes, 'if you look after the pennies, the pounds will look after themselves’.
Due to COVID-19 and the huge increase in working from home, balancing budgets, costs of utilities and the issue of strong available broadband are of critical importance, so I suggest money really does matter.
As we are all working at home these days and perhaps for some time to come, not everyone is aware of what costs can be incurred or indeed what entitlements are available.
Most self-employed people are well aware of their right to reclaim partial costs by working from home; for example phone and broadband, electricity and heat.
You would imagine this should apply to all at home workers too, but does it?
Tax-free expense
Currently, there is a tax-free expense of €3.20 per day that can be paid by employers to employees, but according to research carried out recently, only 5% of employers are making this payment.
This is an allowable expense by Revenue once duties are being performed within normal working hours.
At €16 per week, this can amount to quite a sum over a 12-month period.
As few employers are not paying this expense and are not legally obliged to, the main reason may be the employers are financially stretched themselves or are simply unaware of the allowable expense.
But employees have an alternative - they can claim e-workers tax relief.
Tax relief
It was announced in Budget 2021 that certain expenses will be considered allowable home expenses for people working at home called e-working tax relief.
This is applicable to the tax year 2020 and applies for the duration of the COVID-19 pandemic:
30% of broadband costs for days worked at home.Other vouched expenses where they are ‘wholly’, exclusively and ‘necessarily’ part of your work.E-working is a term attributed to anyone who works from home on a full- or part-time basis, who has a formal agreement with their employer requiring them to work from home, performing essential duties of employment.
You are not entitled to claim tax relief if you bring work home from the office outside normal working hours.
If your employer does not pay an allowance for your expenses, you can make a claim for e-workers tax relief at year end.
Your refund of tax will be based on:
How many days you worked from home.The cost of the expenses and Revenue’s agreed rate for calculating the cost of running a home office.You can claim 10% of the total cost of electricity and heating bills against your taxes.
You can claim 30% of broadband costs for tax year 2020 and this applies for the duration of the COVID-19 pandemic.
You can only claim for the days that you actually work from home.
Tom works from home for 180 working days, as his place of work is closed due to COVID-19.
His household bills for heating and electricity for 180 days is €1,400 and broadband over this time costs €500.
To calculate the tax amount reclaimable, multiply €1,400 (the cost) x 180 days = €252,000 and divide by 365 = €690.
Using the 10% allowable, this amounts to a claim of €69.
Using the same method to calculate the broadband cost amounts to €74 reclaimable.
A total of €143 can now be claimed by Tom for his year-end tax return.
The amount he receives back will depend on the rate of tax he currently pays, either 20% or 40%.
Tax relief can be claimed online using Revenue’s MyAccount service.
This may seem like very little, but, as the old saying goes, 'if you look after the pennies, the pounds will look after themselves’.
Due to COVID-19 and the huge increase in working from home, balancing budgets, costs of utilities and the issue of strong available broadband are of critical importance, so I suggest money really does matter.
This is a subscriber-only article
SHARING OPTIONS: