Working From Home Tax Relief

As restrictions continue, many of us will be working from home for the foreseeable future. So what tax relief is available for employers and employees, and how can you make a claim?

Working from home can mean increased electricity and gas costs, as well as the business costs associated with office equipment. So HMRC provides two tax relief schemes for office workers who primarily work from home, covering:

• tax relief for bills
• tax relief on equipment purchased for a home office

Here’s what you need to know.

Tax Relief For Bills

For the 2020-21 tax year, employees can claim up to £6 a week (or £26 a month) in tax relief when working from home.

Note that this relief only applies to employees who are required to work from home; it is not applicable to those that have chosen to do so voluntarily. So if an employer opens the office but allows employees to choose whether or not they work from the office or at home, the employee could NOT then claim tax relief on bills from HMRC.

Note also that this relief is not a direct rebate, but instead a claim of £6 a week that may vary based on an individual’s income bracket.

If you’re the director of a limited company, check our Guide To Business Costs and Expenses for more tailored information on the tax relief available for broadband, phone and utilities bills.

Tax Relief On Home Office Equipment

This aspect of the tax relief scheme focuses on equipment purchased for a home office.

Though there were elements of tax relief available prior to coronavirus, HMRC have relaxed the usual rules until April 5, 2021 which means that employers will be able to reimburse equipment expenses without additional tax charged to these reimbursements.

Though the employee doesn’t need to primarily work from home for this scheme to apply, they do need to be using the equipment for work-related reasons only. Any new equipment purchased must be for the performance of work duties alone. Therefore, a computer monitor that will be used for business as well as private use will be considered a taxable benefit, but printer ink used in the direct performance of work duties would qualify for tax relief.

If you’re the director of a limited company then check our Guide To Business Costs and Expenses for more tailored information.

How To Claim Working From Home Tax Relief

If your employer is not making good these amounts, employees can claim the tax relief on these costs directly from HMRC by submitting a P87 form (a personal tax account is needed in order to do this).

To prevent any unexpected costs, we recommend that employers outline their employees’ working from home arrangements to ensure that they qualify for the schemes prior to making payments. In addition, be sure to check with your employees that any costs incurred were done so following their working from home arrangements and not before, as any prior costs are not included.

If you need further guidance, get in touch with your Warr & Co. accountant for specific information relevant to you and your individual circumstances.