How do you work out your tax when working from home?...
Since the pandemic, working from home (WFH) has become the new ‘norm’ for so many people. Companies are offering greater flexibility for employees to work from the comfort of their own home, reducing travel time and expenses.
At Ellacott Morris, one question we have been asked a lot recently is ‘what tax relief is available for people who now WFH?’. So, in this blog article we’ll try to explain the rules and any COVID specific arrangements.
Many WFH tax benefits have been around for some time, whereas some have been introduced since the surge in WFH following the March 2020 lockdown. Below, we have detailed the options currently available to employers and employees.
Employer Tax Relief
Employers can make weekly or monthly tax-free reimbursement of costs payments to employees who consistently or regularly work from home. This was extended to those who were forced to WFH during the pandemic. There is a set fee (currently £6/week for weekly paid employees and £26/month for monthly paid employees) that can be paid without the need for the employees to keep records or evidence of costs.
If this flat fee does not cover the costs incurred, then a more substantial tax-free amount can be paid if evidence of costs can be provided by the employee.
It is worth noting that costs that employees were already subject to, before their WFH arrangements, cannot be reimbursed tax-free – i.e. existing broadband expenses.
Employee Tax Relief
Some employees may choose not to reimburse their WFH employees using the method above. In this case employees are NOT automatically able to claim tax relief on their costs. There are some boxes that must be ticked first…
The current HMRC rules state that employees must perform all or most of their work from home. They must also require the use of specific or appropriate facilities not available at their employee’s premises due to lack of provision or location. The employee’s contract of employment must also specify their necessity to WFH. This last rule has subsequently been relaxed to include those who were forced to WFH due to the pandemic.
This option is designed, to enable those who qualify, to claim for additional WFH costs such as extra heating and lighting.
More information for both employers and employees regarding working from home tax relief is available on the HMRC website at www.gov.uk
If you are unsure of the best way to reimburse your WFH employees, please contact a member of the Ellacott Morris team – we’re here to help.
By Michelle Morris on 20/09/2021 05:55:00