Tax relief for home working expenses

IT and office equipment

Any employer-provided IT equipment and associated office supplies is not taxable on the employee, as long as any private use is insignificant. In May, HMRC introduced a new temporary tax exemption for employers to reimburse employees who have had to buy home office equipment/supplies themselves to enable them to work from home as a result Covid-19. This exemption applies from when the lockdown began on 16th March through the end of the current tax year on 5th April 2021.

Mobile phones and home broadband

Company-provided mobile phones are not a taxable benefit, regardless of the amount of private use (limited to one mobile phone per employee). But where an employer looks to contribute towards the cost of an employees’ own personal mobile phone bill or home broadband costs, any such payments are simply taxable as additional earnings. So this option is generally a pitfall worth avoiding falling into.

Home working allowance

Where a business requires an employee to work from home due to Covid-19 restrictions, they can pay a home working allowance to cover some of the extra costs incurred whilst working at home (e.g. electricity and heating).

HMRC allows a payment of up to £6 per week (£26 a month) to be paid free of both tax and NIC (an increase on the previous rates of £4 per week/£18 per month prior to April 6, 2020), making this approach much simpler and a more tax and NIC efficient option than paying towards personal mobile/broadband costs on a grossed-up basis. If an employer cannot pay the allowance, the employee can still claim tax relief on this amount.

How to claim the tax relief

Employees who file an annual Self-Assessment tax return can claim relief via that. For most other employees, they can simply complete submit a P87 Form via the HMRC website or send a postal version.

If you would like to know more, contact support@garbutt-elliott.co.uk.