The coronavirus pandemic still sweeping across the UK and the rest of the world has forced many employees to work from home. While the circumstances that led to companies enforcing homeworking arrangements may be dire, it’s still an attractive option for many employees. You don’t have to wake up early to prepare for work; you don’t have to commute and you’re safe from contracting the virus in the comfort of your home.
In addition to these benefits, homeworking arrangements due to the pandemic grant you additional tax reliefs.
Homeworking Arrangements and Tax Relief
Homeworking has long been practised by the UK workforce and its adoption has only increased over time. The latest data on homeworking from the Office of the National Statistics (ONS)’s Annual Population Survey, which covers the entirety of 2019, of the 32.6 million employed people in the UK:
- 1.7 million said they are working mainly from home
- 8.7 million reported having experience working from home
- 2.9 million said they are working in the same buildings or environments as their home
These numbers show that around 14 per cent of the UK workforce have worked or were working from home in 2019. These people were already enjoying a homeworking allowance of £4 a week.
Now that most people are expected to work from home if possible, the number of the homeworking population has gone up together with the allowance. From £4 a week, employees can now be paid up to £6 a week to cover the additional costs they incur from working at home. What’s more, these employees are also entitled to tax reliefs for the reimbursement of some of their bills.
Eligibility for Tax Relief
According to the guidelines the UK government website posted, an employee who chooses to work from cannot claim tax relief. This benefit is only applicable to:
- employees forced to work from home because their offices have closed; or
- employees that are following the advice to self-isolate
The tax relief will be credited to employers in London. With the help of accountancy service providers, they can reimburse employees with the additional utility costs incurred because they’re working from home. Employees must prove that they incurred additional costs ‘wholly, exclusively and necessarily’ while carrying out their job.
This means fixed costs such as mortgage, rent or water bills cannot be reimbursed. You can, however, file claims for other bills such as the increase in your telephone bills because of your business calls, the surge in your electricity bill from your use of electronic devices and the added cost of broadband connection. For an employee to be reimbursed tax-free, the increase in these bills must be a direct result of working from home.
Apart from bills, the cost of purchasing new computer equipment may also be reimbursed tax-free. In a written statement, the Financial Secretary to the Treasury said that the equipment bought must be obtained for the sole purpose of enabling the employee to work from home as a result of the coronavirus outbreak”. Based on section 316 of ITEPA, if the equipment has been provided to the employee by or behalf of the employer, that equipment will be exempted from income tax.
The pandemic is difficult for both employers and employees. But with these tax relief options, they can work safely from home and get a break from some tax liabilities.