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Personal Finance guide

Working from home? Your guide to e-worker tax relief

Working from home? Your guide to e-worker tax relief
Daragh Cassidy

Daragh Cassidy

Head Writer

Here's everything you need to know about claiming tax relief if you're working from home.

With more and more of us working from home these days, interest in the tax relief available to those working away from the office has skyrocketed. 

The good news is that If you work from home it's possible to claim tax relief on certain expenses such as electricity, heating, and even your broadband.

Most of these tax incentives were already available to those working from home before the country went into lockdown and are now available to anyone forced to work from home due to the Covid pandemic too.

So what’s available and how do you claim? Read on to find out everything you need to know.

Who’s eligible?

E-working is where you work from home for a substantial period on either a full-time or part-time basis. 

To qualify as an e-worker you must:

  • Have some type of formal agreement with your employer that you are required to work from home
  • Be required to perform essential duties of employment at home

Doing ad-hoc work at home or bringing some work home to finish off in the evening or at the weekend does not qualify as working from home.

What’s available?

The first relief is available directly from your employer. 

Employer tax relief 

It’s possible for employers to pay staff up to €3.20 per day, or €768 per annum, tax free. In other words you won’t pay any PRSI, income tax, or USC on this money received from your employer.

Your employer is also free to pay you more than €3.20 a day but you will pay tax in the normal way on any payment above this amount. 

However, employers are under no legal obligation to pay this.

If your employer doesn’t pay you anything you can claim tax relief on your expenses at the end of the year as explained below.

Employee tax relief

The expenses against which you can claim tax relief are:

  • Electricity  
  • Heating
  • Broadband 
  • Other vouched expenses where they are “wholly, exclusively and necessarily” part of your work, as outlined by the minister for finance in Budget 2021

Previously only electricity and heating costs could be claimed. However Budget 2021 expanded the costs against which you can claim relief. 

However things such as laptops, computers, office equipment and office furniture that you may have purchased are not vouched expenses according to Revenue and are not allowable costs.

How much can I claim?

Not a lot to be honest.

You can claim tax relief on up to 10% of your heating and electricity costs and up to 30% on your broadband costs. 

However 10% is the absolute maximum you can apply for and would only be possible if you spent 365 days working from home. Your home working costs must be apportioned based on the number of days you have actually worked from home. 

To calculate your e-working or home working costs Revenue has come up with the following simple equation:

  • multiply your utility bills by the number of days you worked from home
  • divide by 365
  • multiply by 10% (0.1) for heating and lighting and 30% (0.3% for broadband)

You can then claim tax relief at either 20% or 40% on this amount. 

To explain things in more detail let’s look at an example.

Example

In 2020 let’s say you spent €3,000 in total on your gas and electricity and €600 on your broadband.

You also spent 150 days working from home.

Here’s an illustration of the amount you can claim for tax relief.
 

Description 

Calculation

Amount 

Spend on gas and/or electricity in 2020 

€3,000

Days spent working from home - 150 (so multiply spend by this number)

€3,000 x 150

€450,000

Divide by 365 to get your apportioned cost

€450,000 / 365

€1,232.88

Allowable cost is 10% of this amount 

10% of €1,232.88 

€123.29

Description 

Calculation

Amount 

Spend on broadband in 2020

€600

Days spent working from home - 150 (so multiply spend by this number)

€600 x 150

€90,000

Divide by 365 to get your apportioned cost

€90,000 / 365

€246.58

Allowable cost is 30% of this amount

30% of €246.58 

€73.98

This means you will be able to claim tax relief on €197.26 in total for your broadband, electricity and heating costs.

However you are claiming tax relief of €197.26 - not a tax credit. So this means the amount you receive back isn’t €197.26. It depends on your tax band. 

If you pay tax at the higher rate of 40% you will receive 40% of €197.26 back into your account, or a grand total of...€78.91!

If you pay tax at 20% you’ll get just €39.45. So it’s not a lot.

Be careful with your calculations

It may seem like stating the obvious, but once you exclude weekends (104 days), public holidays (9 days) and statutory annual leave (20 days), the average year has 'just' 232 working days or 233 in a leap year. So in most cases this is the maximum number of allowable days you could claim for (not 365/6). 

If you spent ALL of April to December working from home i.e. 3/4ths of the year, you can only claim for 190 days in total once you deduct weekends and public holidays (and this is before you deduct any annual leave). 

So just be careful with your calculations. 

Do I have to pay tax on equipment from my employer?

Usually if you receive extra perks from your employer (so-called benefits-in-kind) you pay tax on these.

However if your employer gives you equipment that you need to do your work, like a new computer, phone, or printer, and you mainly use it for work, it’s not considered a benefit-in-kind by Revenue, which means you won’t have to pay any tax on it.  

How to claim

Firstly, if you’re going to claim tax relief you’ll need to keep copies of all your bills and expenses as proof of expenditure and you should also get written correspondence from your employer to state that you were working from home and are thereby eligible to claim the relief. 

You don’t need to include any bills or documents when applying for the relief, however you should keep these for a period of six years in case Revenue decides to audit your claim in which case they may come looking for proof of receipts and bills etc. 

You must then complete an income tax return after the end of the tax year by signing into Revenue's myAccount.

So 2020 tax relief can be claimed from January 2021 provided all your tax affairs are in order.

To claim:

  • click on ‘Review your tax’ link in PAYE Services
  • select the Income Tax return for the relevant tax year
  • in ‘Tax Credits & Reliefs’, select ‘Other PAYE Expenses’
  • insert the amount of eWorking expense in Amount Claimed.

Your claim will take around a week or two to process and if it's successful your refund will be credited directly into your bank account within three working days or so.

And of course, when claiming for any e-working expenses you should also claim tax relief on any qualifying medical or educational expenses you might have too.

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