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Tax Relief Available for Employees Working from Home Because of Coronavirus COVID-19

Last month, just before the enforced lock down, we wrote a blog about the tax benefits ofworking from home. But, things have changed since then and the majority of employees that are still able to work are now working from home. 

An increase in the Homeworking Allowance from £4 to £6 a week was announced in the Spring Budget with effect from 6th April, 2020.  An employer can pay this fixed sum, tax-free and NIC-free, to meet the additional costs an employee incurs working at home under homeworking arrangements.

Homeworking arrangements mean an agreement between the employer and employee (ideally in writing) under which the employee works at home regularly as part of their job, not just informally at weekends or evenings. During the coronavirus pandemic, HMRC will accept that employees working from home because their employer’s offices have closed - or because the employee is following advice to self-isolate - meet these requirements. Newly home-based employees will be eligible to receive the allowance tax free from the date that their employer agreed they could work from home, or from when government advice was announced.

Additional costs which can be reimbursed include the increased cost of heat, light, insurance, water and telephone or broadband, but not fixed costs such as mortgage interest, rent or water rates.

To be reimbursed tax-free, the employee’s costs must have increased as a result of home working. For example, an employee who is already paying for broadband cannot claim reimbursement for their internet costs simply because they are now working from home. But if they didn’t previously have internet access and now require it, that will be an additional cost.

Where an employer is unable or unwilling to pay the homeworking allowance – or to reimburse in full the employee’s extra costs, HMRC may reimburse BUT costs must be incurred wholly, exclusively and necessarily for the employee’s work. Where a claim is possible, an employee can either keep records and claim relief for their actual costs or claim a fixed amount of £6 a week or £26 a month with an additional claim for the cost of business calls on top. 

You can check if you are eligible here.

Further Guidance

HMRC has published some specific guidance for homeworking due to coronavirus click here. 

It should be also noted that given the current situation, it is likely that HMRC will accept
that an employee can’t work from their employer’s premises, but we haven’t seen
definitive confirmation that HMRC will accept that the further condition of
lack of choice over working arrangements has been met.



 

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