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What tax deductions can I claim for working from home?

01st September 2020

Working from home has become commonplace for many of us. According to the ONS, as much as 46% of employees in the UK worked from home during April 2020. Despite this being a direct result of the coronavirus pandemic, this new working pattern is likely to stay. 


For those that have shifted from the office to their homes, it’s worth knowing that it could actually save you money through reimbursements and tax deductions. Here are the ins-and-outs of claiming for expenses associated with home working. 


Am I eligible? 


You can only claim for expense if you have to work from home on a regular basis. This means that if your employer has closed their office or reduced its capacity to conform to new social distancing guidelines (and you need to work from home as a result), you’re likely to be eligible. Eligible employees will be able to claim for expenses from the date that their employer agreed to home-working, or from when the government announced advice on home-working.


Working from home on an informal basis, on the other hand, would not meet HMRC’s eligibility criteria. If you decide to work from home when your office is open and available, or you continue to work from your home in the evenings, any associated costs will not be eligible for tax deductions or reimbursements. 


What expenses can I claim for? 


Generally speaking, employees can claim for reasonable additional costs incurred by working from home. These include: 

  • Additional heat and lighting 
  • Additional insurance 
  • Metered water 
  • Telephone or internet charges (if not already installed and used exclusively for business purposes) 

You cannot claim for expenses that don’t change depending on where you work from. Such costs include: 

  • Mortgage or rent payments 
  • Council tax 
  • Water rates 

How can I claim for expenses? 


The two most simple ways of claiming for home-working expenses is through employer reimbursement or tax relief. Here’s how they work. 


Employer reimbursement 


Employers can give up to £6 a week (for employees paid weekly) or £26 a month (for those paid monthly) to workers to help cover the additional costs of working from home. No evidence of additional costs are needed and this amount will not be taxed on your payslip. Employees simply need to request this from employers. 


Tax relief 


If your employer isn’t willing to reimburse additional home working costs, then you can claim tax relief. You can claim relief up to £6 a week, which makes it worth £1.20/week for basic rate taxpayers or £2.40/week for higher rate taxpayers. To make the claim, all you need to do is fill out a P87 form, either online or by post. You’ll need to include your employer’s name, PAYE reference (found on your payslip), your job title, and your national insurance number (for the postal version of the form). Similarly to employer reimbursement, you won’t need to provide evidence of the additional costs incurred as a result of home-working. 


What if my expenses are more? 


If you’ve had to buy office equipment to work from home, it’s likely you’ve spent more than the allowances stated above. Usually, employers would reimburse you for the costs and it would be classed as a ‘benefit-in-kind’, meaning you would have to pay income tax and national insurance on it. Given the current circumstances, the government has temporarily suspended this tax, meaning your employer will refund you the full amount spent on office equipment. 


If you’re still unsure about how working from home affects your tax liability, get in contact with IMC financial services. Our expert advisors are on hand to help you navigate complex tax matters and ensure your finances are protected. 

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