A longstanding tax relief for anyone who works from home is set to be axed.

The Government has spent around £500 million giving cash back to workers who have had to stay at home during the pandemic.

Some 4.9 million workers have claimed the allowance since the pandemic began, according to HMRC. The Government has now set its sights on axing the relief as a result of its high cost, with HMRC conducting a review.

However, plans have not yet been confirmed, so for anyone who has worked at home – even for just one day – during the pandemic in the last two years can claim up to £125 per year, or £250 in total.

What is the relief?

Anyone who has to work from home can claim some of their tax back. The relief was introduced in 2003 to help home workers with bills such as internet, electricity, and other expenses they may incur.

For anyone paying the basic rate of income tax the relief is £62.40 per year. For higher rate payers, this rises to £124.80.

How can I claim it?

In order to claim you’ll need identifying documents such as a passport, National Insurance number, or payslips from your work.

You’ll need to go to the Government website, and go through the online process to claim, stating the date when you began to work from home.

The relief will then be paid to you through your normal pay, with up to £250 discounted from your tax bill as a lump sum if you’re claiming for backdated work. Your tax code will change directly with your employer.

There are some stipulations, however. If you’re self-employed or pay tax by self-assessment you cannot claim the allowance, as you must apply for the relief on your return instead.

If you receive expenses from your employer for working from home, this makes you ineligible.

If you’ve always worked from home or if you weren’t obliged to by the pandemic, then you can’t claim either. You can only claim the relief if you didn’t choose to work from home but were told to by your employer.

This is why the cost to the Treasury has ballooned during the pandemic – as millions of workers have probably not been able to work from the office.

That being said, at the start of the pandemic the rules were relaxed so that you only have to show you’ve worked from home for one day to claim the entire year’s sum.

How long do I have left to claim?

While nothing has been made official, it is believed HMRC is actively reviewing the relief with a view to either making it less easy to claim, or shutting it down entirely.

The Chancellor will be making his Spring Statement on 23 March – this is probably the most likely time when the loophole would be announced as closing. Many policies announced at this point tend to come into effect at the end of the tax year on 5 April.

For now however, the scheme is still open and available. If you go online and go through the process, you can still get back a tidy sum for the past two years’ work.