Tax Consequences of Working From Home for Employees

Tax consequences - working from home

Author: Shona Humphreys, Senior Tax Advisor at LHP

Shona Humprheys

Following the lifting of regional and national restrictions and lockdowns, working from home (where appropriate) is set to become a permanent part of the employment environment.

But what in fact are the tax consequences for those employees working from home? It’s important to remember that tax relief is only available to employees who must work from home on a regular basis, either full or part-time. It is not available to an employee who chooses to work from home. Provided the conditions have been met, employees can deduct the following from their earnings:

  • the metered cost of water incurred in the performance of duties
  • additional units of electricity and/or gas incurred in the workspace
  • business telephone calls

This expenditure can be difficult to quantify, so HMRC offers an alternative way of claiming relief in the form of a flat-rate expense of £6 a week (from April 2020). This amount can be claimed without needing to keep evidence of extra costs.

Employees might also decide it’s the perfect time to upgrade their home office equipment to make working from home easier. Tax relief is only available when this equipment has been acquired wholly, exclusively and necessarily for the performance of their duties, a stringent condition that can be difficult to meet. The employee must be satisfied that the equipment is required to do their job and there’s no significant private use.

Additionally, the tax relief that can be claimed is reduced by payments made by employers to their employees for working from home.

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