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Working from home during COVID-19 – tax relief support is available for additional costs

Homeworking tax relief support

As part of the Spring Budget, it was announced that the home working allowance would increase from £4 per week to £6 per week. This can be paid to an employee with no tax or NIC implications in order to subsidise the additional costs the employee is incurring under the homeworking arrangements.

Homeworking arrangements are defined as being necessary as part of the employment contract rather than sporadically. As part of the Covid-19 pandemic, HMRC will accept that working from home due to office closures meet these requirements.

An employer can pay more than £6 per week but sufficient evidence would need to be provided to give a breakdown of the costs incurred as a result of working from home. Otherwise, the amount paid in excess of the £6 per week would be subject to tax and NIC.

Further costs that can be reimbursed include the increased cost of electricity, heating or broadband due to working from home. Guidance from the government states that to reimburse these expenses tax-free it has to have increased because of working from home. For example, if an employee already pays for broadband, then no additional claim can be made.

Most people working from home will be missing their set up in the office and some may have started to purchase some items to make their working from home life more comfortable. This can include things such as keyboards, office chairs and possible further screens for use with their laptop. If the employer has provided these items and providing these items are used mainly for business and there is no significant private use, these are non-taxable. However, unfortunately, these items are taxable if purchased by the employee themselves.

Government guidance states that significant private use should not be based on the time spent on different uses but instead based on employee’s duties and the need for them to have the equipment provided in order to do their job.

What if your employer won’t or can’t pay the allowance?

If an employer is unwilling or unable to pay the £6 per week allowance or reimburse full costs, there is still a possibility that the employee can still get tax relief if the costs are wholly, exclusively and necessarily for the employee’s work.

Providing the employee’s home is a workplace, HMRC accept that these conditions are met. The employee’s homeworking must meet the following 4 conditions:

  • the duties that the employee performs at home are substantive duties of the employment. “Substantive duties” are duties that an employee has to carry out and that represent all or part of the central duties of the employment
  • those duties cannot be performed without the use of appropriate facilities
  • no such appropriate facilities are available to the employee on the employer’s premises (or the nature of the job requires the employee to live so far from the employer’s premises that it is unreasonable to expect him or her to travel to those premises on a daily basis)
  • at no time either before or after the employment contract is drawn up is the employee able to choose between working at the employer’s premises or elsewhere.

If the above conditions are met, the employee can claim relief for household expenses. In this case, an employee can either keep records and claim the relief for actual costs incurred or claim the weekly fixed £6 (£4 per week prior to 6 April 2020).

Claims can be made via tax returns if registered for self-assessment.

This blog is for guidance only, professional advice should be obtained before acting on any information contained herein. The information was correct at time of publishing (24 April 2020).