Tax relief on home working costs during COVID-19 lock down

Given the Coronavirus outbreak, many employers will be considering providing their employees with additional support for working from home. If so, they will need to consider the tax implications of the payments. HMRC guidelines permit employers to pay their workers who regularly work from home under an agreed arrangement, a tax-free payment of up to £312 per year to help cover costs associated with higher household bills such as gas or electricity.

HMRC have confirmed that employers who require their employees to work from home as a result of the temporary closure of their business premises due to the Coronavirus will be able to provide a tax-free payment to workers, in addition to their salary, as a means of offsetting reasonable additional household expenses. HMRC say payments of £6 per week or £26 per month (£4 per week before 6 April 2020) can be made by the employer without keeping any records. Paying a higher amount will need to be supported with evidence that the employee had actually incurred additional costs amounting to more than £6 per week. Only extra costs that relate to working from home can be claimed – those that would still have arisen regardless of the employee working at home, such as council tax, mortgage payments and existing broadband/telephone charges that do not depend on usage, cannot be claimed.

It is up to an employer to decide whether to make the payment. If they don’t, employees may be able to claim tax relief from HMRC on the additional household costs of their home office. Again, HMRC guidance is that amounts of £6 per week (£4 before 6 April 2020) can be claimed without supporting evidence. Larger amounts can be claimed, but will require the employee to keep records of these costs and prove to HMRC that they were incurred ‘wholly, exclusively and necessarily’ in the performance of their work.

The official guidance on claiming tax relief for job expenses associated with working from home can be found on the HMRC website ‘Claim tax relief for your job expenses’. HMRC’s Coronavirus specific guidance can be found at ‘Check which expenses are taxable if your employee works from home due to coronavirus (COVID-19)