Taxman’s £9bn hole due to home working

THE surge in home working is costing the Treasury billions of pounds in takings.

With fewer people commuting or taking business trips, the Government is missing out on major sources of tax revenue.

Car fuel duty income is set to plummet by £5.7billion this year, while ministers expect £3.6billion less from air passenger duty.

The Exchequer is also facing a £25million bill due to a little-known tax perk for home workers – with an estimated 5.5 million now eligible compared with 6,000 last year, according to HM Revenue and Customs. But with more people drinking at home during lockdown, the Treasury is set to rake in an extra £1.1billion in alcohol duty.

Sarah Coles, personal finance analyst at investment firm Hargreaves Lansdown, said: ‘The most recent government statistics show 40 per cent of people are currently working from home, which means a massive drop in commuting, and a subsequent fall in fuel duty.

‘And with so much business travel becoming nigh- on impossible, not only are we using less fuel, we’re flying less too.

‘Business travellers are responsible for a significant chunk of business and first-class travel attracts a higher rate of air passenger duty. So it has played its part in a 90 per cent drop in air passenger duty this year.’

Tom Selby, senior analyst at AJ Bell, added: ‘Having the vast majority of the country working at home for much of the year has played havoc with the Treasury’s tax receipts.’

The Treasury is now forecast to make just £21.8billion in fuel duty over the current tax year ending in

April 2021 – down from £27.6 billion in the previous tax year. Air passenger duty is only expected to be £500million compared with £3.7billion the previous year.

Meanwhile, home workers are costing an extra £25million in tax relief.

The allowance entitles employees to tax relief on up to £6 a week to help cover costs such higher heating bills. It is worth up to £62.40 a year for basic-rate taxpayers and £124.80 for higher earners.

Because the relief is only available for those who have been told to work from home – rather than those who choose to – the cost to the Treasury was previously expected to be negligible.

But claims have rocketed and since launching a new online claims service in October, the taxman said it had received around 1.2million applications.

One silver lining for the Treasury was the extra alcohol duty it was expected to take in this year, with total receipts now predicted to hit £12.9billion.

Ms Coles added: ‘The rise in alcohol duty confirmed what we all secretly suspected, that an awful lot of people were taking the edge off the stress and boredom of lockdown by increasing their alcohol consumption. As a nation, we drank so much that we managed to more than offset the fact we were buying cheaper alcohol in supermarkets instead of paying pub and restaurant prices.’