With more people working at home than ever before, deciphering the tax relief on those home-related expenses is no longer solely the headache of the self-employed. In addition to getting your head around the regular policies, there are some new COVID-specific rules that now apply.
I employ people who work from home
Employers can still make tax-free and NI-free payments to cover employees’ reasonable additional expenses. The employee must be doing some or all of their work at home, under homeworking arrangements (ie. they work from home frequently or it follows a pattern of so many days per week). Taking work home to do outside office hours doesn’t count.
During the pandemic, HMRC accepts that employees who work from home because the office is shut or because they’re self-isolating are also included from the date it was agreed that they’ll work from home.
From April 2020, employers can pay £6 per week for weekly paid employees or £26 per month for monthly paid employees (£4 per week and £18 per month before April 2020). The employee doesn’t need to keep records of their extra expenses and the employer doesn’t need to justify the expenses.
Another option is to reimburse the actual cost of the additional expenses incurred such as extra heating, lighting, insurance, metered water, telephone and internet (if the employee wasn’t already paying for these). Costs such as mortgage interest, rent, council tax or water rates that haven’t increased by working from home do not apply and you can’t reimburse for building alterations.
I am an employee with no reimbursement from my employer
HMRC has indicated that it will be more lenient on claims for home working expenses during the pandemic. If you are working at home for all or part of your week because of COVID but not through your choice, relief will be available for the 2020/21 tax year.
Employees who meet the usual rules or the temporarily relaxed pandemic rules for working from home can claim for additional heating, lighting and metered water but can’t claim for mortgage interest, rent, council tax, water rates or insurance. The fixed amount of £6 per week or £26 per month can be claimed without supplying specific calculations of the expenses.
If you don’t always work from home and still spend an amount of time in the workplace, the same amount can be claimed. Also, if your employer pays for some but not all of your expenses, you can get tax relief on the difference up to the £6 per week or £26 per month amount.
Any tax relief to claim where your employer does not reimburse the full rate can be made either on your tax return if you complete one, or if you do not, through a portal here.
Tax relief on home office kit
There is no taxable benefit for employers who buy work equipment for employee use at home. But there is a temporary exemption from Income Tax and National Insurance which would normally apply when employers reimburse employees for equipment they have bought for home working. This exemption applies from 16 March 2020 to 5 April 2021 as long as the purchase was solely to enable homeworking as a result of the pandemic and would have been exempt from tax if provided directly by the employer.
Unfortunately, it’s not easy to claim tax relief on office furniture as a capital allowance if the employee has bought them and the employer cannot or will not reimburse. Furniture is not considered the same as computer equipment, so beware.
If you’re an employer with staff now working from home or you’re an employee that has to work from home due to the pandemic, it’s important that you seek professional advice to make sure that you claim the correct tax relief on your expenditure. Contact the experts at CRM for more help and guidance on 01865 379272.