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Wrap-up 2020: which tax reliefs to claim for the time you spent in lockdown

21st January 2021

Wrap-up 2020: which tax reliefs to claim for the time you spent in lockdown

There has never been a better time to understand the tax reliefs that you’re entitled to. The multiple COVID-19 lockdowns have wreaked havoc not only on our mental and social health, but also on our money. 

That’s why you should make sure you claim as much support from the government as you can – now that 2020 is over.

Whether you’re self-employed, furloughed, working from home or working on site, there’s support available to be claimed. 

1. Home office allowance (up to £312)

If you’re self-employed (i.e. a sole trader), you can claim a flat rate expense if you use your home as your work space. 

What you can claim depends on how many hours you spend working at home each month. If you work 25-50 hours a month, you can claim £10 for that month; for 51-100 hours, you can claim £18; for 100 hours or more, you can claim up to £26. 

Another way to do it is by calculating how much of your home you use for work. You can then claim the portion of expenses (electricity bill, rent, and so on) that you use for work.

That said, this can get complicated quickly so if you do opt for this method, be mindful of having a paper trail to present to HMRC.  

2. Employment expenses (up to £2,500)

If you’re employed, you are also entitled to claim tax relief from working from home, but only if working from home isn’t your choice. That includes the WFH time during lockdowns.

Luckily for you, you can claim without having to do a tax return. Instead, you can fill out a P87 which lets you claim up to £2,500 in expenses by answering a few quick questions on the gov.uk site. 

Don’t forget, before you claim, you need to have all your receipts at the ready as proof of your expenses. 

3. The company car and the Mileage Allowance (starting at 40p per mile)

This is one for furloughed employees.

Did you know that you can claim tax back by handing your company car back to your employer? If you have a company car, this benefit is deducted from your £12,500 tax-free personal allowance. By returning the vehicle whilst you’re stuck at home, you could get an all-important increase in your monthly income. 

For self employed workers, you can also claim back your travel using the Mileage Allowance:

4. Flat rate expenses

If you’ve had to go back to working on site, flat rate expenses can be really useful. You can claim for work uniform, tools, equipment etc. First, you claim the cost of an item (e.g. £90 protective boots for a construction site ). Next, you deduct tax at the rate you’d pay (20% tax of £90 = £18). That £18 is then deducted from the tax you pay as a tax relief. 

Here are a few examples specified by HMRC:

  1. Cleaning your uniform
  2. Repairing or replacing your small tools (e.g. scissors if you’re a hairdresser, trowels if you’re a plasterer, spanners if you’re a mechanic)
  3. Cleaning, replacing and repairing your specialist or protective clothing (e.g. hard hats, protective boots and overalls)

5. The Marriage Allowance (up to £250)

The Marriage Allowance can be handy if you’re in a household that’s reliant on a single income, especially if you’ve been furloughed during lockdown. To be eligible, you need to be married or in a civil partnership. One of you must earn less than the tax-free personal allowance (£12,500).

It lets you transfer up to 10% (£1250) of this allowance to your higher earning spouse, as long as they earn less than £50,000.

If you’re eligible, you can reduce the tax bill on your income and increase what you take home every month. 

 6. Gift Aid (25p for every £1 donated)

Donations have been a major part of this last year – the Black Lives Matter movement has seen more than £1 million in donations. 

What lots of people don’t know is that if you earn more than £50,000 and you’re signed up to Gift Aid, you can claim a tax relief on your donations.

Gift Aid allows charities to claim an extra 25p for every £1 donated. The tax relief lets you claim back the difference between the basic tax rate (20%) and higher tax rate (40%) of your donation as a tax relief. 

Take a look at the example below:

7. Cycle to Work Scheme (up to 42% off a new bike)

Lockdown has seen a massive boost in bike sales. But did you know that if your employer is part of the Cycle to Work scheme, you can save up to 42% on your spend? 

The scheme was introduced in 1999 by the UK government to promote healthier living and greener transport options. Employers essentially buy your bike and equipment tax-free and you repay the cost in monthly deductions from your salary. And you don’t even need to leave the sofa to claim – just contact your employer who will have all the info you need. 

You can buy e-bikes, road race bikes, helmets – almost endless possibilities!

8. Maternity allowance (up to £5,800)

Finally, this allowance is specific to self-employed women who are 26 weeks (or further) pregnant. It’s a tax-free benefit that can be claimed when you’re not entitled to maternity pay. 

Whilst we don’t know how long it will be before business can go back to normal after COVID, it’s a useful allowance to be aware of.

Based on the National Insurance that you pay, the Maternity Allowance accounts for up to 90% of your gross earnings up to £148 per week for 39 weeks. 

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