Employees required to work from home can have a £6 per week or £26 per month allowance paid tax-free by employers or, during the pandemic, can claim a deduction from earnings for this allowance, HMRC has confirmed.

The allowance is to cover variable tax-deductible additional costs incurred by employees who are required to work from home.

Employees not reimbursed

Employees can claim a fixed amount of £4 per week up to 5 April 2020 and £6 per week thereafter without invoices or back up.

Alternatively, employees can claim relief on the actual amounts incurred, subject to being able to provide evidence (for example variable bills such as heating and lighting the workroom). In addition, equipment bought such as chairs, laptops etc can be claimed. Fixed bills such as mortgage interest, rent or council tax cannot be claimed.

Employees who are not reimbursed by their employer can claim this allowance as a deduction from earnings in their tax returns (self-assessment return or a postal form P87) or via the government gateway to claim tax relief in-year for 2020/21 through their tax code. To find out which route to use, visit HMRC’s new online claims checker.

We understand that these rules will revert to the previous position under which the allowance is tax-free only where paid by employers when the pandemic is over.

HMRC has confirmed that the £6 per week/£26 per month is available in full, even if an employee splits their time between home and office (ie. it does not need to be pro-rated over the number of days spent each week at home and in the office.)

Claims will not be rolled forward so, if applicable, a new claim will be needed next year.

We understand that if an employee who has told HMRC that they are working from home returns to working in the office, there is no requirement for the employee to tell HMRC.

The employee will get tax relief at the rate at which they pay tax. For example, if you pay the 20% basic rate tax and claim the £6 a week you would get £1.20 per week in tax relief (20% of £6).

The claim can be back-dated to when the employee started to work from home due to Covid 19.

Employers reimbursing employees

If the employer reimburses the employee, then the employee will receive the full £6 a week rather than the tax benefit of £1.20.

The employer would suffer the full cost but would get corporation tax relief on the payment.

We would suggest that in your payroll you have a new category that is free of tax called home working allowance and make payment of £26 a month for the period up to date. Thereafter, £26 can be paid for every subsequent month that they may have to suffer home working.