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working from home - what are the extra costs?
24 September 2020
Working at home’s become normal for many of us in recent months and it’s highly likely it’ll continue to play a part in the way we work over the next few weeks, months and possibly even years to come. It does however provide many benefits such as flexibility, less commuting time and a stronger work-life balance, but it does come with additional costs.
What options are there to recoup these costs?
An employer can pay a tax free amount of £26 per month to cover reasonable additional costs. However there must be official home working arrangements agreed and in place, for example, the frequency – whether it’s permanent or follows a pattern (3 days a week working at home and 2 in the office).
Reasonable costs which are covered include additional heating and lighting, increased charges for home insurance and business related telephone charges.
If a flat rate isn’t appropriate, a larger amount can be paid, but this must be fully evidenced. This can be a direct reimbursement or a higher scale rate can be agreed with HMRC.
If the employer doesn’t reimburse costs, the employee can claim relief themselves, but only for expenses incurred wholly, exclusively and necessarily in the performance of their employment. The duties must be substantively performed at home and require appropriate facilities which aren’t provided at the workplace. For example, the distance from home to the employer’s premises should be substantial and wouldn’t allow for a daily commute.
When working from home, it’s important to think about other implications including household insurance – have you told your insurer you’re working from home, which requires more equipment and how it could impact your insurance premiums and council tax?
HMRC recently updated the allowances process and how this will be paid – essentially the change is for employees whose employers have told them to work from home permanently to support in reducing the spread of Covid and didn’t previously work at home pre-Covid.
On the 1st October, HMRC issued a new tool to assist in making the claim and an adjustment will be made to your 20/21 tax code rather than getting a cash refund.
Taxpayers must make the claim direct, agents cannot make the claim on their behalf.