Employee Home Working Expenses
With the Covid-19 pandemic meaning many businesses are closed or reducing the number of employees on site, working from home has become the norm for many employees.
Employees who are required to work from home are able to claim a deduction against their taxable earnings for the additional associated costs such as additional heating and electricity, even if they are required to work at home only part of the time. The key here is that the employee must be required to work from home by their employer, rather than simply choosing to do so.
To save employees the time and hassle of trying to work out precisely how much a heating bill etc has increased owing to working from home, HMRC have a fixed expense rate of £6 per week to compensate those required to work from home for their additional costs. This amount can either be paid as a tax free allowance by the employer, or claimed directly by the employee. Provided the claim doesn’t exceed the £6 per week rate, HMRC will not ask employees for records supporting their claim.
If the employee’s costs are above £6 a week, it might be worth doing the extra work and calculating the exact amount by which electricity, heating etc bills have increased. Note that no claim can be made for expenses which the employee would have incurred anyway, such as council tax, broadband or mortgage payments.
For the tax year 2020/21 (6 April 2020 to 5 April 2021) only, where the employee was required to work at home for any part of the tax (even a single day), the employee can claim the £6 a week expense for every week in the year. This will generate a tax deductible expense of £312, which for a basic rate taxpayer will save £62.40 in tax. For a higher rate taxpayer, the tax saving is £124.80.
HMRC has set up a microsite to enable claims to be made more easily – visit https://tinyurl.com/homeworkingexpenseNov20. The employee will need their Government Gateway account details, or to set up an account if they don’t already have one.
Claims are generally given effect through an adjustment to the employee’s tax code. For employees who are required to complete self assessment tax returns, the claim should be made in the return.
If you have any questions, please get in touch with your usual Newby Castleman LLP contact.