If you’re one of the many thousands of employees who’ve had to work from home during the COVID-19 lockdown – either because your normal workplace is closed as a result of Government lockdown measures, you’ve been told to self-isolate or you’ve been asked to by your employer – you’ll be glad to know there is support available to help cover the extra household costs.
Whether you’ve had to have a broadband line fitted, or you’ve had to purchase as desk and chair so you can continue to work, your employer can choose to reimburse you for those expenses, and if they choose not to, you may be able to claim tax relief on those extra costs. In other words, save on your tax!
It’s worth noting that if you already work from home by choice, then you’re treated differently, and if your employer doesn’t already reimburse you, you cannot claim tax relief on the extra costs.
Financial support for working from home
On the 13th May a raft of special measures were announced by the Government to give employees extra support for working from home due to COVID-19.
The statement made in full:
“To support employees who are working from home and need to purchase home office equipment as a result of the coronavirus outbreak, a temporary tax exemption and National Insurance disregard will come into effect to ensure that the expense will not attract tax and NICs liabilities where reimbursed by the employer.
The expenditure must meet the following two conditions to be eligible for relief:
- That equipment is obtained for the sole purpose of enabling the employee to work from home as a result of the coronavirus outbreak, and
- The provision of the equipment would have been exempt from income tax if it had been provided directly to the employee by or on behalf of the employer (under section 316 of ITEPA).
This exemption is a temporary measure and will have effect from the day after the regulations come into force until the end of the tax year on 5th April 2021.
HMRC will exercise discretion for any reimbursed expenses that were paid from 16th March 2020 (which is the date that government recommended employees work from home where possible) to the date the regulations took effect and will not collect tax and NICs due on any these reimbursed expenses.
This measure is being announced outside the normal fiscal process in order to ensure that employers and employees are able effectively to manage their working from home arrangements as soon as possible.”
What it means for employers
Your employer can make non-taxable payments to you for ‘reasonable costs’ incurred while working from home if:
- there are arrangements in place between you and your employer
- you must work at home regularly under those arrangements
- if this is the case, your employer can make payments that are not taxable for the additional costs of heating and lighting your work area, the metered cost of increased water use, increased charge for internet access, home contents insurance or business telephone calls.
The HMRC will allow payments of either the following;
- up to £6 per week or £26 per month – without having to justify the amount paid, or
- the actual additional costs you incur – but these would need to be justified.
If an arrangement is made for you to work from home, and you do so regularly, your employer can make reasonable payments to you to cover the costs above, without any tax consequences.
What this means for employees
For employees, the rules are more restrictive and will depend on any amounts that have already been reimbursed by your employer.
You may be able to deduct your working from home expenses from your taxable earnings if the expense has been incurred wholly, exclusively and necessarily in the performance of your duties.
HMRC will consider that these conditions are met if:
- the duties you perform at home are your normal daily duties of the employment (for example, they must be carried out and represent all or part of your duties of the employment)
- those duties cannot be performed without the use of appropriate facilities
- no such facilities are available to you on your employer’s premises
- at no time before or after the employment contract is drawn up can you choose between working at your employer’s premises or elsewhere.
In normal circumstances, these conditions will only be met by a very small proportion of those who work from home, as typically the arrangement is for convenience rather than a requirement of the job.
However, since COVID-19, and the government guidelines for lockdown, new measures were put in place to allow more employees to temporarily work from home.
If your employer requires you to work from home, i.e. doesn’t permit you to work from their premises due to COVID-19, and the other conditions set out above are met, this could mean you can claim a deduction for appropriate working from home costs.
If these conditions are met, you can deduct from your earnings:
- the extra unit costs of gas and electricity consumed while a room is being used for work
- the cost of water used in the performance of duties – this needs to be metered.
- the costs of business telephone calls (including internet access).
Due to their nature, these costs can be difficult to calculate. So, HMRC will instead accept a deduction of £6 per week or £26 per month for all applicable expenses. This excludes the costs of business telephone calls, as these are claimed separately.
If you want to deduct more than this, you must keep records to show how the figure has been calculated.
And remember, you can only claim a deduction for expenses that haven’t been reimbursed by your employer.
These expenses can be claimed in a self-assessment return or, if you’re claiming for less than £2,500 of expenses in a single tax year, you can claim directly through the HMRC website.
For more information on tax relief, including for working from home, visit the Government website.
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