WORKING FROM HOME ALLOWANCE

Employees required to work from home can have a £6 per week or £26 per month allowance paid tax-free by employers or, during the pandemic, can claim a deduction from earnings for this allowance, HMRC has confirmed the following:

• Company directors can claim tax relief on £6 per weekHMRC says that claims in line with the employers’ payment will not need to justify that figure, so you won’t need to keep receipts or prove information.The impact of a £6/wk claim is the tax savings:

• £1.20/wk (about £62/year) for basic 20% rate taxpayers

• £2.40/wk (about £124/yr) for higher 40% rate taxpayers.
   

The allowance is to cover tax-deductible additional costs that employees who are required to work from home have incurred, such as heating and lighting the workroom, and business telephone calls.
 

Employees can claim a fixed amount of £4 per week up to 5 April 2020 then £6 per week thereafter.
 

The relaxation to enable employees working at home because of COVID-19 to claim a deduction (under 336 ITEPA 2003) where they have not been reimbursed by their employer (which would be exempt under s316A ITEPA 2003) was announced in a Parliamentary question answered on 27 March.

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HMRC has confirmed that the £6 per week/£26 per month is available in full, even if an employee splits their time between home and office: ie it does not need to be pro-rated over the number of days spent each week at home and in the office.

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Claims will not be rolled forward so, if applicable, a new claim will be needed next year.

 

If an employee who has told HMRC that they are working from home returns to working in the office, there is no requirement for the employee to tell HMRC.

 

See EIM32825 for the relationship between:

• Employees’ expenses deductible under s336 ITEPA 2003, and

• Reimbursements by employers exempted under s316A ITEPA 2003.