Tax reliefs to support homeworking employees during the coronavirus pandemic

There are several tax reliefs available to support employees working from home during the coronavirus pandemic.

Chief among these is the homeworking allowance, which was increased from £4 to £6 a week (or £26 a month) in the Spring Budget. This is a fixed sum which an employer can pay to meet the additional costs an employee incurs while working from home under ‘homeworking arrangements’.

‘Homeworking arrangements’ usually means that an agreement is in place between the employer and employee, under which the employee regularly works from home. Employees working from home as a result of enforced workplace closures are now deemed to have met these requirements, and are therefore eligible to receive the allowance tax-free from the date that they started working from home, or from when the government advice was announced.

The £6 allowance is tax-free and NIC-free, and an employer can pay more than that if they can prove that the additional costs are necessary. If there is insufficient evidence to support this, any excess will be subject to income tax and NIC.

The increased costs of heat, light, water, insurance, telephone and broadband can be reimbursed, but it must be proven that these costs were only incurred as a result of the employee working from home.

Where an employer is unable or unwilling to pay the homeworking allowance, an employee may apply for tax relief. The rules for this stipulate that the employee must be unable to work from company premises, and must at no point have had the option of choosing between working in the office or from home.

If successful in applying for tax relief, an employee can claim relief for household expenses including heating and light for the working area, cost of water used in the performance of duties, and unit costs of telephone calls.

Employees can make a claim online, by phone, by post, or through their tax return if they are registered for self-assessment. They may either keep records and claim relief for their actual costs, or claim the fixed amount of £6 a week.

Unfortunately, there is no provision currently for tax relief on the purchase of new office equipment, such as additional monitors, keyboards, or desks and chairs purchased to help with homeworking. It is difficult to justify these purchases as ‘necessary’, so employers should consider their position and their finances before purchasing additional equipment.

For more information, HMRC has published specific guidance on homeworking employees, which you can read here