Employees contracted to work from home can claim £6pw without records.
Employees who have to work (under contract) from home on a regular basis can claim tax relief for the incremental costs of certain bills, such as business telephone calls, gas and electricity (although fixed costs such as rent and broadband where these costs represent both personal and business use cannot be included in these claims).
If the employee either voluntarily agrees or chooses to work from home (ie not as part of the employment contract), this allowance cannot be claimed.
A flat-rate deduction of £4 per week is available to employees to cover additional household expenses. From April 2020, this will be increased to £6 per week where they work at home under homeworking arrangements. No records of actual costs incurred need to be kept if claiming the flat-rate allowance.
What happened previously?
Employees working from home
It is a condition for tax relief under section 336 ITEPA 2003 that the expenses must be incurred ‘wholly and exclusively’ in the performance of the employee’s duties. In practice this means that tax relief can only be allowed for:
the additional unit costs of gas and electricity consumed while a room is being used for work
the metered cost of water used ‘in the performance of the duties’ (if any) but no tax relief would be available for water rates
the unit costs of business telephone calls (including ‘dial up’ internet access).
From 6 April 2012 HMRC normally accepted that employees who satisfy the conditions for relief are entitled to a deduction of £4 per week (or £18 per month) for each week/month that they are required to work at home, without having to justify that figure.
Employees who wish to deduct more than £4 per week (or £18 per month) will be expected to keep records and to be able to show how their figure has been calculated.
Before 6 April 2012 lower weekly figures were allowed as above; these amounts were £2 per week for 2006/07 and 2007/08 and £3 per week for 2008/09 to 2011/12.
From 2006/07 the following expenses were not treated as allowable for employee tax purposes, because the employee will be required to make the payments whether or not they are working from home:
council tax (rates)
mortgage interest/endowment premiums
insurance for the property or its contents
HMRC will usually accept that an employee is entitled to claim allowable expenses under section 336 ITEPA 2003 if all of the following conditions apply:
the duties that the employee performs at home are substantive duties of the employment (these 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.