For those of you who don’t keep up with these things, I am able to tell you about a tax allowance that has increased by 50% from the 6th April 2008. Rarely do you see any tax allowance or relief increase in double digits let alone by 50%.
However, before you get too excited, the relief in question has only increased from £2 to £3 per week.
The item about which I am writing is in connection with the reimbursement of household expenses incurred as a result of working at home. It has always been possible for a company to reimburse you for these expenses and the tax free amount was £2 per week and as previously mentioned, it has now gone up to £3.
However, even for this paltry sum, HMRC have laid down certain regulations to avoid those amongst you who see it as a pure way of getting tax free sums out of a company.
Aside from the procedures, which can be found at www.hmrc.gov.uk/incometax/relief-household, I feel that despite the generosity of this massive increase, this is another example of where successive governments have shown their complete lack of any knowledge of reality and scarcely any generosity. I remember when I first started work; luncheon vouchers were available as a tax free benefit to employees in the sum of 15p per day. That sum stayed in force at the same rate for many years despite the fact that you literally couldn’t buy anything for that amount. Similarly, the amount at which P11D legislation starts treating employees as “higher paid” has been set at £8,500 for literally decades. My first salary when I started work was £4,100 and at that time, £8,500 really was a good salary. Now, it is well below the national average and dare I say it, below subsistence levels.
Of course, the Inland Revenue argue that increasing some of these allowances and reliefs will just create more opportunity for abuse and they may well be right. With the higher paid employee band, were it to be for instance in line with the higher rate of tax which now kicks in at around £40,000 it would in theory mean that many employees could earn less than that and receive a company car and not have any tax benefit. Nevertheless, it just is ludicrous to refer to legislation relating to higher paid employees at a starting rate of £8,500 and some overhaul of that system must be well overdue.
As for the household expenses allowance, my only dilemma is how to spend my extra £1 per week!