If you regularly work from home, you may wonder whether there are tax reliefs available. After all, working from home means you’ll likely use more water, electricity, and gas to keep you warm, make a cup of tea, heat lunch and more – like you would if you were in an office. The difference is that instead of your workplace fronting the cost of your energy usage throughout the working day, it’s added to your household bills instead.
In this post, we’ll take a look at the current rules and explain how they apply whether you’re at home permanently, work on a hybrid basis between the office and your home, or even if you’re self-employed.
I work from home. Are there any tax reliefs or allowances available?
Yes, there are tax reliefs and allowances available to those who work from home, but only under certain conditions.
The home working allowance allows employers to reimburse employees for any additional costs incurred by working from home. The can be any amount, but there’s a threshold of £6 per week (or £26 a month for those paid monthly) – anything over this amount requires additional admin and evidence of the costs, whereas payments below or equal to the threshold require no record-keeping or proof of compliance.
Of course, some employers simply won’t wish to make additional payments like this. So there’s another option, too: employees can claim tax relief from HMRC.
You can claim relief on £6 a week at your income tax rate, with no evidence or records required. This relief equates to:
- £62.40 per year for basic rate taxpayers (20% of £312)
- £124.80 per year for higher rate taxpayers (40% of £312)
Or you can claim relief on your actual expenses, but you will need clear records of everything you’ve spent, and there are only a few costs that you can legitimately claim for (business calls and energy usage).
Who is eligible for working from home tax relief?
Employees can only claim tax relief if they have to work from home under a homeworking agreement. For example, if:
- Their job requires them to live far away from the office
- Their employer does not have an office
- The office is closed every Friday, and employees are required to work from home that day.
In contrast, tax relief cannot be claimed if the employee voluntarily chooses to work from home.
These rules have changed in recent years. Before the global COVID-19 pandemic, employees needed a home working arrangement with their employer under which they were required to work from home on a regular basis to be eligible for the home working allowance or tax relief.
During the pandemic, the government relaxed these conditions to support those working from home due to the COVID-19 travel and social distancing rules. Employees could claim the home working allowance if they were required to work from home for any period.
This could be paid by their employer, or, where it was not paid by the employer, employees could claim relief for £6 a week against their employment income for a tax refund from HMRC. Those relaxed rules applied for the 2020/21 and 2021/22 tax years.
However, something many employers and employees have missed is that from 6 April 2022, the rules reverted to the strict statutory position.
What if I’m self-employed?
If you’re self-employed and working from home, the rules are slightly different. You can claim tax relief on some of the costs associated with your home office. There are two ways to do this:
1. Simplified expenses (Flat-rate method)
Under the simplified expenses scheme, you can use a flat rate based on the hours you work from home each month, as follows:
- 25 to 50 hours per month: £10 per month
- 51 to 100 hours per month: £18 per month
- 101 hours or more per month: £26 per month
This method simplifies record-keeping, as you don’t need detailed evidence of your actual costs.
2. Actual costs method
If you don’t think the flat rate method will accurately cover all of your costs, then you can calculate the actual proportion of your household costs that relate to your business activities. Allowable expenses include:
- Heating and lighting
- Phone and broadband bills (business proportion only)
- Council tax
- Mortgage interest or rent (business proportion only)
- Home insurance (business proportion only)
- Repairs directly related to your workspace
You’ll need to carefully record your expenses and be able to demonstrate how you calculated the proportion used for business purposes.
How do I claim tax relief for working from home?
Making a claim is really simple. If you’re eligible, some employers may pay you the £6 a week allowance. However, most employees will have to claim tax relief. To do that:
- Decide whether you wish to claim relief on £6 a week or your total expenses
- Retain evidence of your home working arrangement
- Retain evidence of your costs (if you wish to claim against total expenses)
- Claim the tax relief from HMRC’s portal
- Alternatively, if you submit an annual self-assessment, claim it through your tax return instead.
Can I backdate my claim?
Yes, you can backdate your claim. As long as you meet the eligibility criteria for each year you’re claiming, you can backdate claims for up to four previous tax years.
I work from home, but I’m required to travel to the office every so often. Can I claim tax relief on the travel expenses?
Whether or not an employee’s home is a workplace does not affect the availability of tax relief for travel expenses. Travel expenses from home to a permanent workplace will only qualify for tax relief if the journey qualifies as travel in the performance of the duties of the employment.
Even though it may have been accepted that the employee’s home is a workplace, it does not necessarily follow that they’ll be entitled to tax relief for the cost of travel between their home and a permanent workplace.
This is because the place where an employee lives will ordinarily be down to their personal choice. The expense of travelling from their home to any other place is a consequence of that personal choice, not an objective requirement of the job.
HMRC guidance states that where an employee performs substantive duties of their employment at home as an objective requirement of the job, they may accept their home as a workplace for the purposes of the ‘travelling in the performance of the duties’ rule. Where this is the case, the employee will be entitled to tax relief for the expenses of travelling from home to other workplaces, as their travel is in the performance of their duties.
HMRC will usually only accept that working at home is an objective requirement of the job if the employee needs certain facilities to perform those duties, and those facilities are only practically available to the employee at their home.
HMRC states that they will not accept that working at home is an objective requirement of the job if the employer provides appropriate facilities in another location that could be practically used by the employee, or the employee works from home as a matter of choice.
Even where the employee works at home as an objective requirement of the employment, tax relief for the cost of travel between their home and their permanent workplace will only be due for travel made on days where the employee’s home is a workplace.
Only on those days is the employee travelling between 2 workplaces. On other days, the employee is travelling between their home and a permanent workplace, which is ordinary commuting.
Need more information?
The rules around working from home are a little confusing. We hope our post has helped make things a bit clearer, but if you have any further questions or would like to discuss your situation with one of our team members, then please get in touch.
