You may be one of the millions of people across the UK who have found themselves working from home because of the coronavirus pandemic.

And while there are various benefits to working remotely, such as no commuting, you may have found your household expenses have increased. These extra costs include heating and lighting, metered water, and additional insurance.

Tax-free employer payments

Since 2003, employers have been able to make tax-free payments to help their staff cover reasonable extra expenses that arise while homeworking.

To be eligible, you must be carrying out your duties under working from home arrangements, i.e. you regularly carry out some or all your work at home.

But earlier this year, HMRC relaxed its rules on homeworking in response to the Covid-19 outbreak.

That means you can receive the homeworking allowance tax-free from the date your employer agreed you could work from home. Or you’re entitled to the payment from the date the Government initially advised working from home in March 2020.

How much are you entitled to?

From 6 April 2020, your employer can pay you an allowance of £6 a week to cover your additional costs, or £4 a week before this date.

With this flat-rate payment there’s no need for you to keep records of your extra costs. Plus, you’re entitled to the same rate, whether you work part-time or full-time.

Alternatively, your employer can reimburse you for the specific additional costs in relation to homeworking.

Which costs can you be reimbursed for?

Extra costs include:

  • Heating
  • Metered water bills
  • Lighting
  • Home contents insurance
  • Business calls
  • A new broadband connection

Which costs aren’t included?

You can’t be reimbursed for costs that would stay the same whether you were working at home or in an office, such as:

  • Mortgage interest
  • Rent
  • Water rates
  • Council tax

Can you make a claim for tax relief?

If your employer hasn’t paid you the homeworking allowance, you can make a claim for tax relief.

In October 2020, HMRC confirmed this relief would be available to people who regularly work from home for all or part of their time as a result of Covid-19.

Apart from insurance, the eligible costs you can claim for yourself are very similar to those that can be reimbursed by your employer.

You can claim tax relief on the exact amount of extra costs you’ve incurred, although you’ll need to have evidence such as contracts, bills or receipts. Or you can claim the £6 a week allowance (£4 per week before 6 April 2020).

Tax relief on equipment

You may also be able to claim tax relief on equipment you’ve bought such as a mobile phone, chair or laptop. But you can only claim if you need the equipment to carry out your job and you use it for work (there should be no significant private use).

How should you make a claim?

You can make a claim:

  • Online, with the new P87 micro-service
  • By phone
  • By post
  • Or through your self-assessment tax return

Tax return preparation

The team at Churchill Taxation can help ensure your tax return is completed correctly, and that you’re claiming the right amount of tax relief.

And because our tax advisers stay up-to-date with the latest industry changes, including those in relation to Covid-19, you can rest assured your tax matters are in safe hands.

To find out more, call us on 07813 434195 or email nicole.andrews@churchilltaxation.co.uk

Nicole Andrews

Nicole Andrews

Tax Director & Co-owner