Tax relief for employees working from home 1035

Working from home has been a big change for many people. Those who are used to going to the office every day have found themselves working from home over the last 6 months, and possibly for a while longer yet. 

As a business owner, remote working might be new to both you and your employees and as with anything to do with running a business there is lots to get your head around. 

One thing that you may be getting asked about now that the ‘honeymoon period’ of working from home has passed and your staff are using their own resources to carry out work from home, is what expenses and tax relief is available to them. 

We have put together some tips, advice, and regulations to help you understand what you need to do as a business owner with employees working from home… 

Create a Work from Home Policy 

To begin with, it’s always a good idea to put together a Work from Home (WFH) Policy, whether it’s to cover staff working remotely for the odd day here and there, or for longer term. 

A Work from Home Policy is an agreement between the employer and employee that outlines the expectations and responsibilities for employees who work from home.  

The document should include: 

  • Who is eligible to work from home 
  • The process for requesting to work from home 
  • The approval process 
  • Expected working hours 
  • Communication channels 
  • Availability expectations 
  • Security requirements 
  • Technology requirements 

You can also include information about any company benefits, perks, and working from home expenses. 

Tax relief for working from home 

From 6th April 2020, employers can pay employees working from home a fixed monthly amount of up to £26 towards any costs incurred by being required to work from home.  

This tax relief is for bills incurred by working at home on a regular basis but cannot be claimed if the employees has chosen to work from home. 

You will need to create a formal written agreement with the employee in order to qualify for expense relief. 

What can be claimed for when working from home 

If an employee is required to work from home, there are certain things that they will be able to claim tax relief for. 

This includes: 

  • Extra household expenses such as gas, electricity and water used when working at home 
  • Business telephone calls 
  • Expenses from any work-related travel, not including their usual commute 

An employee cannot claim for things that are used for both private and business use, e.g. rent or broadband. 

In most cases you can claim tax relief on the full cost of purchasing equipment for an employee, such as a laptop that they need to carry out their work remotely.  

If you give your employee money to purchase the item, they must reduce the amount on their tax relief claim by the amount of money you have given them. 

How to claim for relief when employees are working from home 

If you need to reimburse employees for working from home expenses, the easiest way to do this is via the fixed monthly payments mentioned above. Using this method does not require the employer or employee to provide any records to HMRC. 

Alternatively, the employer can files the claim themselves online. If they currently submit a Self-Assessment tax return, they can also claim relief on their expenses this way. 

Who is eligible to claim relief 

To be eligible to claim relief for working from home expenses, the employee must have paid tax on their employed income for the tax year they are claiming against. The amount of relief that can be claimed is based on how much the employee spent, and the rate of tax they currently pay. There is an eligibility checker here

If you have any questions please feel free to get in touch with us here at Magpie Accountancy. 

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