The Covid-19 pandemic forced large numbers of employees to work from home for
the first time. Having made the transition to home working, post pandemic, many
employees have continued to work from home some or all of the time.
Employees who work from home may incur costs as a result, such as increased
household bills. The tax legislation allows employers to make a tax-free payment of
£6 per week (£26 per month) to employees who work from home at least some of
the time to help them meet the costs. The payment can be made tax-free regardless
of whether the employee works from home through choice.
If the employer does not contribute towards the costs of additional household
expenses, the employee may be able to claim tax relief. During the Covid-19
pandemic, the conditions were relaxed and employees who were required to work
from home during the pandemic were able to make a claim of £6 per week for
2020/21 and 2021/22 for the full tax year (even if they returned to the office for some
of the year). However, the easement came to an end on 5 April 2022, and for
2022/23 onwards relief is only available where the employee is required to work from
home (either by the employer or the nature of the work), but not where the employee
has the option to work at home or at the employer’s premises but chooses to work
Hybrid working arrangements are attractive because of the flexibility that they offer.
However, the choice element will limit to ability to claim a deduction for household
expenses. Requiring the employee to work from home on, say, one specified day of
the week will open the door to a claim.
Where an employee works from home, depending on the nature of their job, they
may need equipment to enable them to do so. Where the employer provides
homeworking equipment, no tax liability arises in respect of that equipment.
During the Covid-19 pandemic, the rules were relaxed so that where an employee
purchased homeworking equipment, the cost of which was later reimbursed by the
employer, the reimbursement was not taxed. If the employer did not reimburse the
cost, the employee could claim a tax deduction.
However, this easement ended on 5 April 2022. The strict statutory rules now apply,
and as employees are not able to claim a deduction for capital expenditure (such as
the cost of a computer), where this cost is reimbursed by the employer, the
reimbursement will be taxable.
However, a deduction is allowed for revenue expenses wholly, necessarily and
exclusively incurred in undertaking the employment duties, and any reimbursement
of those costs can be made tax-free.
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