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Working from home and tax relief

/ 1 April 2020

Chris Smith

For office workers and others across the UK, working from home has become the norm almost overnight. What tax relief can be claimed in respect of additional costs that are incurred?

For some individuals, their employer may be willing to reimburse their costs for working from home in this time of need.  If not, the next option open to employees is to check whether tax relief is available and then make a claim for themselves.

Following the overview in our recent article on coronavirus and employee tax, here is a more detailed look at these options.

Employers reimbursing the cost to the employee

To help employees cover ‘reasonable additional expenses’ that result from working from home, employers are able to make tax-free payments. These payments are not eligible for income tax or National Insurance.

Eligible employees must be conducting their employment duties under ‘homeworking arrangements’. This should not be a problem given the UK Government advice to work from home unless doing otherwise is absolutely necessary.

Any reimbursement can only cover reasonable additional costs you incur whilst working at home.  There are effectively two methods to calculate what to pay:

  • Your employer can pay you up to £4 a week or £18 a month (increasing to £6 a week or £27 a month from 6 April 2020) flat rate to cover your additional costs if you have to work from home. You will not need to keep any records.
  • Your employer can reimburse actual costs you incur. Allowable costs include:
    • Additional heating and lighting costs for the workspace
    • Metered water costs
    • Additional insurance
    • Access charges for phone or internet
      • If you were already paying for a broadband connection or landline rental before your homeworking started, these are ‘existing expenses’ and your employer can’t reimburse it tax-free. If, you don’t have a home broadband or a landline and need a these to work from home, they would qualify for tax-free reimbursement as ‘additional costs’
    • Company equipment (laptops, monitors etc) and office furniture
      • Where the sole purpose is to enable the employee to perform work duties and the personal use is insignificant, these items are regarded as tax-free benefits in kind

Costs that would be the same regardless of whether you worked from home – such as mortgage interest, rent, council tax, water rates – aren’t eligible for tax-free reimbursement. Nor are costs that put you in a position to work at home such as building alterations to your property.

Obtaining tax relief as an employee

If you can demonstrate that your home is a workplace, you can claim relief for):

  • Additional heating and lighting costs for the workspace
  • Metered water
  • Company equipment (laptops, monitors etc) where the sole purpose is to enable the employee to perform work duties and the personal use is insignificant

Again, costs that would be the same regardless of whether you worked from home – such as mortgage interest, rent, council tax, water rates – aren’t eligible. Nor is insurance.

Often it is not practical to calculate the extra costs which are allowable. When that is the case, you can claim £18 per month as a monthly paid employees (£4 per week otherwise) – increasing to £27 per month or £6 per week from 6 April 2020 – with no requirement to justify the amount. For business calls, you can make a further claim based on actual costs.

As an employee, you can make claims by post, phone or online. If you are registered for self-assessment, you can also claim via your tax return.

For more information on the implications of coronavirus for employers and employees, visit our coronavirus page or get in touch using our enquiry form.

Chris Smith

Director of Personal Tax Compliance

T +44 (0)20 8922 9160
E chris.smith@bkl.co.uk

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