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Who Qualifies for Work-From-Home Tax Deductions?

5 Min Read | Dec 21, 2023

Working from home has its perks. You can make the 20-step commute from your bedroom to your office in a little under four seconds. And pajamas are the new business casual wear.

But does working remotely have any tax advantages? What are work-from-home tax deductions or write-offs? We want you to get every deduction you deserve—so you’ll have more cash in your pocket to get out of debt, save for an emergency fund, and win with money. So let’s dig into the deets on work-from-home deductions.

Can I claim the home office tax deduction if I've been working remotely?

If your employer instituted work-from-home policies during the pandemic, you probably spent some time and money setting up a home office (the kitchen table just wasn’t going to cut it for a desk). And maybe you’ve continued working remotely some or all of the time.

Unfortunately, if you’re a salaried or hourly employee (the kind who receives a W-2 during tax season), you can’t take tax deductions for your home office . Bummer. (But grab some string cheese from the fridge next to your desk, and you’ll feel better before you know it.)

Self-Employed Independent Contractors

So who gets to take work-from-home tax deductions? Well, the IRS reserves them for self-employed independent contractors . In other words, if you work full time as a freelancer or have a side hustle that requires an office, you qualify to deduct a portion of your home’s expenses.

The IRS used to allow W-2 employees to deduct expenses related to working from home, but Congress changed that with its 2017 tax reform bill. A few very specific types of W-2 employees can still take the home office tax deduction, but we’ll talk about that in a minute.

Tax Deductions for Contractors

If you’re self-employed, you’ll probably end up receiving one or more 1099-NEC tax forms from the companies you worked for. A 1099 lists income you earned as an independent contractor so you can report it on your taxes. Don’t just toss those in a desk drawer. You’ll need them come tax time!

When you’re self-employed you often end up wearing lots of hats—accountant, HR rep, janitor. And since you don’t have an employer withholding taxes from your paycheck, it’s up to you to manage them yourself. That includes the self-employment tax , which is the full 15.3% of Social Security and Medicare taxes (an employer normally pays half of these taxes).

The best way to lower your tax bill is by claiming tax deductions . Here are 16 self-employment tax deductions to help you save money!

One of the bigger tax deductions you can take if you work from home as an independent contractor is the home office deduction. To take this deduction, you’ll need to figure out the percentage of your home used for business. Say your home office occupies 10% of your house. That mean you can deduct 10% of your utility bills (electricity, water and gas), mortgage payment or rent, property taxes, mortgage interest, homeowners insurance, repairs, and maintenance.

Home-Based Worker Exceptions

There are exceptions to every rule, right? So the small (and very specific) group of W-2 employees who can claim work-from-home tax deductions are Armed Forces reservists, certain performing artists, state or local government officials who are paid on a fee basis, people with physical or mental disabilities, and teachers. 1

If you fall into any of those groups, you’ll still need to jump through a couple of hoops before you actually get a deduction. (Yep, Uncle Sam loves to have you jump through hoops.)

Got small business tax questions? RamseyTrusted tax pros are an extension of your business.

First, the IRS only allows you to deduct expenses above 2% of your adjusted gross income. 2 So if your income is $50,000, your threshold to begin claiming expenses is $1,000.

Reaching the threshold for expenses doesn’t sound super difficult, but the second hoop is the real deal breaker. To claim expenses, you’ll need to itemize deductions . Since most W-2 employees get a lower tax bill by taking the standard deduction instead of itemizing, you’re probably just going to be out of luck if you want to claim expenses.

How to Claim Work-From-Home Tax Deductions

If you’re still reading, that must mean you’re self-employed and can claim work-from-home tax deductions. If that’s the case, you’re going to have to fill out a Schedule C . This form lists profit or loss from business, and it’s where you can deduct all of your business expenses. Hopefully your deductions will add up to a nice little chunk of change!

Get Some Help With Your Taxes

If your taxes are simple enough to do on your own and you want an easy-to-use tax software that can give you some peace of mind, check out  Ramsey SmartTax ! No hidden fees, no advertisements, no games. That’s how it should be!

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We don’t have to convince you that taxes are complicated—especially for small-business owners. But the good news is that there are plenty of small-business tax deductions available to make tax season a little less painful!

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If you’re self-employed, you’ll receive a 1099-NEC listing the income you earned as an independent contractor. Don’t toss them out. You’ll need them to file your taxes. Take a look to learn more.

Home Office Tax Deduction: Work-from-Home Write-Offs for 2023

Can you claim the home office tax deduction this year?

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Like millions of people in the U.S., you may be fortunate to work from home. ( Data show that the number of people working from home nearly tripled over the past few years). That may make you wonder whether you can claim a home office tax deduction on your federal income tax return. After all, you likely have some unreimbursed expenses. For example, you might pay for printer paper, ink, and other office supplies. Plus, your electric and utility bills are likely higher since you're home during the day. 

But the reality is not every taxpayer can claim the home office deduction. Here's what you should know about the home office tax deduction before you file your 2023 tax return.

Home office tax deduction: Who qualifies?

Some people who work from home can deduct their business-related expenses, and there is also something called the "home office tax deduction" that lets you write off expenses for the business use of your home. However, whether you can claim those tax breaks depends on your employment status.

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Employees miss out. If you're a regular employee working from home, you can't deduct any of your related expenses on your tax return.

In the past, you could claim an itemized deduction for unreimbursed business expenses, including expenses for the business use of part of your home if they exceeded 2% of your adjusted gross income. However, that deduction was temporarily suspended. It's scheduled to go back into effect in 2026.

Home office tax deduction for self-employed people

Self-employed people can generally deduct office expenses on Schedule C (Form 1040) whether or not they work from home. This write-off covers office supplies, postage, computers, printers, and all the other ordinary and necessary things you need to run a home office.

The home office tax deduction is an often overlooked tax break for the self-employed that covers expenses for the business use of your home, including mortgage interest, rent, insurance, utilities, repairs, and depreciation. 

It doesn't matter what type of home you have (e.g., single family, townhouse, apartment, condo, mobile home, or boat.) You can also claim the home office tax deduction if you worked in an outbuilding on your property, such as an unattached garage, studio, barn, or greenhouse. 

Note: You cannot claim the home office tax deduction for any part of your home or property used exclusively as a hotel, motel, inn, or the like.

Claiming the home office tax deduction might lower your tax bill , but to qualify, you must use part of your home "regularly and exclusively" as your principal place of business. If you only work from home for part of the year, you can only claim the deduction for the period that you can satisfy the "regularly and exclusively" requirements.

"Regular use" means you use a specific area of your home (e.g., a room or other separately identifiable space) for business regularly. Incidental or occasional use of the space for business doesn't count.

"Exclusive use" means you use a specific area of your home only for your trade or business. The space doesn't have to be marked off by a permanent partition. You can't claim the home office deduction if you use the space for business and personal purposes. However, the exclusive use requirement might not apply if you use part of your home:

• For the storage of inventory or product samples; or
• As a daycare facility.

The space must also be used:

• As your principal place of business for your trade or business;
• To meet or deal with your patients, clients, or customers in the normal course of your trade or business; or
• In connection with your trade or business if it's a separate structure that's not attached to your home.

(See IRS Publication 587 for more information about these and other requirements for the home office deduction.)

How to calculate the home office deduction

If you qualify, there are two ways to calculate the home office deduction. 

• Under the actual expense" method , you essentially multiply the expenses of operating your home by the percentage of your home devoted to business use. If you work from home for part of the year, only include expenses incurred during that time. 
• Under the simplified method , you deduct $5 for every square foot of space in your home used for a qualified business purpose. Again, you can only claim the deduction for the time you work from home. 

For example, if you have a 300-square-foot home office (the maximum size allowed for this method), and you work from home for three months (25% of the year), your deduction is $375 ((300 x $5) x 0.25).

Tax Tip: If you use the simplified method, you can't depreciate the part of your home used for business. However, to the extent you qualify, you can still claim itemized deductions for mortgage interest, real property taxes, and casualty losses for your home without allocating them between personal and business use.

The deduction is claimed on Line 30 of Schedule C (Form 1040) . If you use your home for more than one business, file a separate Schedule C for each business. Don't combine your deductions for each business on a single Schedule C.

If you use the actual expense method to calculate the tax break, also complete Form 8829 and file it with the rest of your tax return. If you use more than one home for business, you can file a Form 8829 for each home or use the simplified method for one home and Form 8829 for others. Combine all amounts calculated using the simplified method and amounts calculated using Form 8829, and then enter the total on Line 30 of the Schedule C you file for the business.

Employees with a side business

If you're an employee at a "regular" job, but you also have your own side hustle, you can claim deductions for business expenses and the home office deduction for your own business — if you meet all the requirements. Being an employee doesn't mean you can't also claim the deductions you're entitled to as a self-employed person.

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Rocky Mengle was a Senior Tax Editor for Kiplinger from October 2018 to January 2023 with more than 20 years of experience covering federal and state tax developments. Before coming to Kiplinger, Rocky worked for Wolters Kluwer Tax & Accounting, and Kleinrock Publishing, where he provided breaking news and guidance for CPAs, tax attorneys, and other tax professionals. He has also been quoted as an expert by USA Today , Forbes , U.S. News & World Report , Reuters , Accounting Today , and other media outlets. Rocky holds a law degree from the University of Connecticut and a B.A. in History from Salisbury University.

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Managing business travel expenses

Working from home expenses & allowance.

Here at Travelperk, our workplace management team was quick to respond to the new demands of WFH. They were able to quickly recognize what we could and could not supply and set up expense processes for the cost of purchasing or transporting essentials.

What are working from home expenses?

• A reliable internet connection—either an unlimited business broadband service or a cellular backup based on a mobile router, like a Mifi dongle
• A laptop or computer,—as well as additional hardware such as a laptop riser, an external keyboard and mouse, and a second (or third) monitor
• Specialist software—you’ll need the right tools to carry out your job, in addition to communicating and collaborating with your team
• Appropriate furniture - get your desk set-up feeling comfortable with an ergonomic chair

What work from home expenses can you (or your employees) claim?

Hmrc and working from home expenses, what working from home expenses do you not have to cover, how can employees calculate working from home expenses, how can businesses track and collect working from home expenses.

At TravelPerk, we use Expensify to allow our employees to make expense claims. Working from home meant paper receipts were not an option, so it was good that we were already digital-first.

What home office equipment should you provide?

What is the nature of the work, call-heavy jobs,  large files and downloads, when is it easier to provide a home office stipend and avoid expenses.

Here at TravelPerk, we made the decision to provide staff with a general working from home stipend. We felt this was more time-efficient than asking people to make individual expense claims for recurring things like additional data usage or stationary. Only expenses that exceed the stipend are processed by our Finance team.

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Working from home: could you be eligible for up to £125 in tax relief?

HMRC gives the option to claim online without receipts as Covid keeps more away from offices

Millions of people who have spent the last few months working at their kitchen tables are being encouraged to apply for tax relief using an online form that could return them up to £125.

At the beginning of October, HM Revenue and Customs (HMRC) launched an online portal offering employees a hassle-free way to claim the relief without the need to provide receipts or to make complicated calculations.

The government said this week that just under 55,000 people have so far applied online, which suggests millions more who have been told to work at home could still make a claim.

The tax relief is offered to workers provided they were told by the employer, rather than chose, to work from home – and provided they have not received home expenses payments directly from their company.

HMRC’s interim director general of customer services, Karl Khan, says: “We want everyone to get the money that they are entitled to, so we’ve made the online service as easy to use as we can – it takes just a few minutes to make a claim.”

He says once the application has been approved, the portal will adjust an individual’s tax code for the 2020-21 tax year. The employee will receive the tax relief directly through their salary and will continue to receive the adjustment until March 2021.

What’s it worth?

If you go for the easy, no-receipts-required route, your claim will be based on the assumption that you have incurred costs of £6 a week while working from home and you will get back the tax that you would have paid on that sum. For basic rate taxpayers – those earning between £12,500 and £50,000 a year – the relief is worth 20% of the £6: £1.20 a week. Higher rate taxpayers (those earning £50,000-plus) can claim 40% or £2.40 a week.

If you end up working the whole tax year at home – from 6 April 2020 onwards, you will be able to reduce next year’s tax bill by £62.40 or £124.80 respectively. Many people may want to make the claim at the point they go back to work, or if the worst happens at the end of the tax year next April.

You can check if you are eligible through the Gov.uk portal .

The advantage of taking that route is that it is easy to apply and you don’t have to dig out any paperwork. If you work at home four days a week and still go into the office on the fifth, you can apply as if you only work at home. You don’t get a cash payment; your pay packet simply rises a little as you pay slightly less tax.

What if my bills are much higher?

If the sums above do not come close to the extra expenses that you have incurred, you can apply for relief on higher sums – although it’s more complicated, says Suzanne Briggs, a partner at the tax accountancy firm, Blick Rothenberg.

“Employees who have incurred significantly higher costs have two options,” she says. “Those who complete a self-assessment form each year simply add the claim to that. If you are lucky enough not to have to fill in an annual return, HMRC has a form – the P87 – that allows employees to claim back expenses up to a maximum of £2,500.”

You will need your employer’s name and PAYE reference (which you can find on your payslip or P60), and your job title.

The HMRC website says that additional costs include things such as “heating, metered water bills, home contents insurance, business calls or a new broadband connection”. They do not include costs that would stay the same whether you were working at home or in an office, such as mortgage interest, rent or council tax.

In reality, Briggs says, employees can only claim the extra heating and electricity costs for the proportion of the house they occupy while working at home, or things such as telephone calls made for business reasons.

Most workers, she says, won’t be able to claim the cost of their broadband as HMRC assumes that households would have this anyway. However, you can register the cost of having to buy a laptop, or an office chair that you only use for work purposes.

Again, you won’t get back the full cost of the extra expenses, only tax relief on the total. So if you can show £500 of extra costs, as a basic rate taxpayer you will see your net wages increase by 20% or £100 – or £200 for higher rate taxpayers.

“Be aware you will have to demonstrate these extra costs and back them up with receipts. Most people will probably decide that the £6 a week, no-receipt claim is the easier option,” she says.

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Working from Home Tax Relief – what you need to know

Homeworking has become the norm for millions of people following the pandemic. But the rules on claiming tax relief for additional household costs you incur when working from home have changed. So read on to find out if you’re still eligible to claim up to £140 per year and whether can you still backdate your claim.

What is the Working from Home Allowance?

The government introduced working from home tax relief in 2003 to allow for anyone working from home to claim back some tax to help cover the increased household costs associated. This used to add up to a £4 a week tax-free sum.

However, because the pandemic forced millions more people to work from home, the government upped the amount to £6 a week. And the rules were also temporarily changed so you didn’t need to prove that you worked from home regularly. Instead, it meant you could claim up to £140 per year even if you only worked from home for one day.

But with all covid-related financial measures now removed, millions of workers are now back in the office either full time or part time. And in response, HMRC has updated its guidance for the 2022-23 tax year and introduced criteria that makes it harder to get a tax rebate for working from home.

Working from home? See if a garden room could help you create the perfect home office.

Working from home tax relief: What has changed?

The eligibility criteria for the working from home tax rebate is different depending on which tax year you are claiming for.

For the 2020-2021 and 2021-2022 tax years you’ll need to meet the following criteria to be eligible for working from home tax relief. You can claim for these tax years if:

• Your employer told you to work from home.
• Your household costs increased because of working from home.
• And your employer did not pay you expenses to cover the extra costs associated with working from home.

You can backdate claims for the working from home allowance, so there is still time to claim for both the 2020-21 tax year and the 2021-22 tax year.

However for the 2022 – 2023 tax year the working from home tax relief eligibility rules have changed. The new rules state you can’t claim tax relief if you ‘choose to work from home’. This includes if your contract lets you work from home some or all of the time, if you work from home because of Covid or if your employer has an office, but you cannot go there sometimes because it’s full.

But some people will still be able to make a claim with the HMRC working from home allowance applying if your job requires you to live far away from your office. Or if your employer doesn’t have an office.

You can’t claim working from home tax relief if you are self-employed . Instead, though you can include some expenses on your tax return.

Need an independent financial adviser or tax advice? Find a local adviser and book your free initial consultation through our partners at Unbiased. 

You don’t have to make life’s big financial decisions alone. Get the right IFA for you today with our partners at Unbiased.

How to apply for the working from home allowance

HMRC have set up a specific online portal where you can claim working from home tax relief. You can find it at www.gov.uk/tax-relief-for-employees/working-at-home .

The portal starts off by asking you a series of question to check you are eligible for the working from home allowance. And it states clearly that different eligibility criteria apply to different tax years.

After that you will need your Government Gateway user ID and password to make your claim. If you don’t already have a user ID, it takes a few minutes to create one.

Once you’ve logged in, you need to give the date of when you started working from home. If this was the start of the first lockdown back in 2020, the date will be 23 March 2020. You can then claim the working from home tax allowance for the entire 2020-21 tax year plus the two weeks before. This is because the new tax year starts on 6 April, but lockdown started on 23 March. You can also claim for the 2021-22 tax year at the same time and the 2022-2023 tax year if applicable.

If you pay your tax via self-assessment, you can’t claim the working from home allowance through the portal. Instead, you’ll need to apply via your tax return.

How much tax relief can I claim?

The working from home allowance is designed to cover the extra costs you incur when you work from home rather than heading off to the office. It can be tricky working out exactly how much of your heating or electricity bill is associated with the time you were at your desk so there is essentially a flat rate of £6 a week you can claim.

You can get this payment in two ways:

• Your employer can pay it : You can get an extra £6 a week tax-free through your salary.
• You can claim tax relief on it from HMRC : If your employer won’t pay you the allowance, but you have or had extra unavoidable costs due to working from home, you can deduct the amount from your taxable income. You then claim tax relief on it from HMRC.

Tax relief on £6 a week adds up to:

• £1.20 a week for basic rate taxpayers, or £62.40 a year
• £2.40 a week for higher rate taxpayers, or £124.80 a year
• £2.70 a week for additional rate taxpayers, or £140.40 a year

If your home working costs add up to more than £6 a week you can claim tax relief for a larger amount. However, you will have to provide evidence to the taxman of what your costs were, such as receipts, bills or contracts. You must also prove these costs were directly connected to your employer’s requirement for you to work from home.

Need help with your tax return? Find an accountant and book your free initial consultation through our partners at Unbiased. 

What can I claim working from home tax relief for?

You can only claim for things to do with your work, such as:

• business phone calls
• gas and electricity for your work area

If you need an accountant to help with your tax return, our partners at Unbiased can match you with the right adviser .

Can I still make a backdated claim?

HMRC says it will continue to accept backdated claims for people who have not yet claimed stating that taxpayers will receive a ‘lump sum payment’ for any successful backdated claims. It also stated that taxpayers have until the 5 April 2025 to make claims for 2020-21 tax year, and until 5 April 2026 make claims for 2021-22.

If you want to make a backdated claim you can do this via HMRC’s Working from Home Allowance portal.

How will I get the money?

If you are claiming for 2022-2023 tax year HMRC will adjust your tax code, and you’ll receive the tax relief through your salary.

And tax experts are urging employees who have previously made a claim to check their PAYE tax codes because if HMRC has included the relief and you are no longer eligible then you could get a surprise tax bill.

With more than 27,000 regulated financial advisers, our partners at Unbiased can match you with the right adviser. Find a financial adviser today.

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Working from home 2024: HMRC tax relief explained

Many of us had to shift gears and work from home at some point throughout the pandemic. In fact, the latest numbers show that 5.6 million people went from the office to their home office (or kitchen table) at some point during 2020. Surprisingly though, only around half made applications for the working from home tax relief. 

At a rate of £6 per week, HMRC working from home allowance might not sound like much. But if you were required to work from home for even just one day during the lockdowns, you could be due for a nice chunk of change in the form of tax relief.

We get it – your employer and HMRC usually handle the tax codes, benefits and financial stuff. It’s normally out of your hands and this sounds like more effort than it’s worth. 

But we’re here to show you just how simple and quick it is to make a claim if you’ve been working from home, and get the working from home tax relief that’s due. 

What is HMRC working from home allowance? 

How to claim the working from home tax relief 2023/24, give your company a friendly nudge.

Through the working from home allowance 2023/24, HMRC offers compensation, in the form of tax relief, for the costs associated with remote employment. You know, all the extra gas and electric bills associated with running a home office, for example.

Effectively, the government reimburses the cost in the form of a tax credit for working from home. 

The money is taken off your current tax bill that’s paid every month, meaning that you’ll keep slightly more of your salary. But if you wait to claim until the end of the tax year, you may receive a straight-up refund in the form of a cheque.

Working from home tax relief backdated

Most of us were required (to put it lightly) to begin remote working in March 2020, which means we’re now onto the fourth year of possible claims. If you missed out on claiming the tax rebate working from home in previous tax years, don’t worry: HMRC allows you to backdate claims. Phew!

Applying for HMRC working from home tax relief 2022-23 and the year before that (since most of us became eligible for WFH tax relief in 2020) could mean you are eligible for up to £280 in total. And just in case you’ve been working from home prior to that, it's good to know that they allow backdating for up to four years. 

As well as Covid-related changes to the working from home allowance, HMRC brought in other measures such as furlough through the job retention scheme. But this all ceased in October 2021. So, the work from home allowance is now one of the only measures still in place that you can make the most of.

Now that there is no longer a government requirement to work from home, like the lockdown, only a small percentage of the UK’s workforce is actually eligible to apply for tax relief in the 2023-24 tax year. But this doesn’t mean you should miss out on previous years. 

Luckily, the deadline has not yet passed to make a backdated claim for working from home tax relief 2021. HMRC has confirmed that workers have until April 2025 to claim for the tax year ending in 2021, and 2026 for this current year. 

To apply for working from home tax relief, you need to follow the steps on the government’s website. There are two different times to claim: at the end of the tax year or during the tax year. 

Here’s how to claim working from home tax relief 2023/24:

• Check you are eligible by answering the questions on the government portal
• Create a government gateway ID. To do this, you’ll need your national insurance number, alongside one of the following: recent payslip, P60 or passport
• After signing in, select the date that you began working from home (note that you can put a date from a previous year and receive the tax relief together)
• Simply wait for your cheque to arrive from HMRC

Another important thing to note: HMRC allows you to claim tax relief on other expenses and extra costs too, such as business travel . But they do expect receipts and documentation. In order to apply, fill out a P87 working from home form.

Questions? We’ve got you covered. Here are some of the most common questions regarding tax relief for remote workers.

Can I claim working from home tax relief 2023/24 tax year?

Short answer: Yes, but beware that the eligibility criteria has changed. Even if you were able to claim during 2021, there is no guarantee that you will qualify in 2023/24. 

Who is eligible for tax relief?

The main purpose of regulation around this tax relief is to prevent double claims. This means that if your employer has already paid for or reimbursed the extra costs of working from home, applying for tax relief would be slightly cheeky on top. 

Moreover, you cannot have chosen to work from home, it must be a requirement. For example, if you are required under government restrictions, or there are no facilities available for you to complete your work at the office. 

This applies to those claiming working from home tax relief Scotland, and working from home tax relief Wales, along with those in Northern Ireland. Unfortunately, working from home tax relief Ireland is totally different since it is not part of the UK. 

Important: You don't need to work from home full time. Even one day is enough to claim for the whole year, as long as your employer required it, and it wasn't just a choice.

What can you claim the tax relief for?

As part of HMRC working from home scheme, the compensation can be claimed for extra household costs that have occurred as a result of your work. While this includes the electricity and gas bills associated with using your home as an office, tax relief also exists with regard to business phone calls, for example. 

Remember that HMRC specifies that you cannot apply for expenses that affect your private life, even if there is a crossover. Unfortunately, this means no claiming for meal deals. 

How much working from home tax relief to expect?

The amount of tax relief you can receive is proportionate to the tax you pay. 

Basic rate taxpayers receive 20% of the £6 per week figure, which is £1.20. Across one year, this adds to £62.40.  

Higher rate taxpayers also receive their equivalent tax bracket back in the form of tax relief, which is 40%. This is £2.40 per week or almost £125 per year. Finally, those who earn above £100,000 and pay an additional rate tax of 45%, are eligible for £2.70 per week, which leads to £140.40 per year.  

What if it doesn’t cover the cost?

Due to the sheer number of claims processed over the past two years, it would be virtually impossible for HMRC to deliver tax relief on a case-by-case basis. This means that for most of us, £6 per week is a hard limit. 

Those who would like to cover extra needs, such as money you’ve spent on uniforms, tools, or professional subscriptions have the option to do so. To do this, fill out a P87 working from home form. 

In this case, evidence like receipts and other documentation is required. While keeping track of all your paper receipts may feel outdated (not to mention bad for the environment), it’s what HMRC requires to process your transactions. 

Usually, it’s the finance team at your organisation that handles employee expense claims, receipt reconciliation and reimbursements. But if this isn’t the first time that you’ve found yourself picking up the slack with expense claims, it might be time to nudge your company into the 21st century. 

Never lose a receipt again

We know just how difficult it is to try and file away all of your receipts, let alone how time-consuming it is to organise them when it comes to making a claim. But why should that mean that you miss out on the tax relief that you are owed? 

With Pleo’s receipt scanner , you’ll get a notification on your phone as soon as the transaction goes through the till. Simply scan your receipt there and then in order to lock it in and when you’re ready to make a claim, watch your organisational worries disappear. 

And when your cheque comes in, go ahead and order that ergo chair you’ve had your eye on.

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Employment Income Manual

Eim01472 - employment income: household expenses: payments to reimburse additional costs: introduction, section 316a itepa 2003.

Section 137 Finance Act 2003 introduced a new exemption for payments by employers to reimburse employees for reasonable additional costs they incur while working at home under homeworking arrangements. The legislation can be found at section 316A ITEPA 2003. The exemption applies to payments made on or after 6 April 2003 for expenses incurred on or after that date.

The exemption only applies to payments made by the employer. It does not entitle an employee to deduct unreimbursed household expenses. To deduct unreimbursed household expenses an employee must satisfy the much more restrictive tests in section 336 ITEPA2003, see EIM32760 .

Homeworking arrangements

There is a definition of “homeworking arrangements” in section 316A(3). You can accept that there are homeworking arrangements where 2 tests are met:

• there must be arrangements between the employer and the employee
• the employee must work at home regularly under those arrangements

The arrangements need not be in writing but usually will be. They do not need to apply to all employees. The exemption does not apply where an employee works at home informally and not by arrangement with the employer. For example, it will not apply where an employee simply takes work home in the evenings. It applies where an employee works at home by arrangement with the employer instead of working on the employer’s premises. The exemption may also apply where the arrangement involves hybrid or flexible working.

You should accept that an employee works at home regularly where working at home is frequent or follows a pattern. For example, where an employee agrees to work 3 days each week on the employer’s premises and 2 days at home you should accept that the work at home is regular. This will be so even if the days on which the employee works at home vary from week to week.

Other guidance

For guidance on the household expenses the employer can reimburse, see EIM01474 .

For guidance on the amounts that can be reimbursed, see EIM01476 .

For an example, see EIM01478 .

As regards NICs, see NIM05682 .

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Homeworkers: What Can You Claim in Tax Relief?

Employees Advised on What Can and Cannot be Claimed as Tax Relief

As a result of the Covid19 pandemic, there has been an explosion in the number of employees working from home with many of those based at home for the first time in their careers. As a consequence, there will be many people who are unaware that they may be entitled to claim tax relief for their work-related expenses. Tax preparation specialist David Redfern, director of DSR Tax Refunds Ltd , details the circumstances under which employees may be entitled to claim tax relief as a result of working from home as well as those expenses which cannot be claimed as tax relief.

As the pandemic continues to revolutionise working practices in the UK, workers may find that their household bills have increased as a result. Redfern stated “The pandemic has impacted on everyone’s lives in a considerable way and those workers who now find themselves working from home have probably discovered that being at home for considerably more time has also added to their household costs. However, they may not be aware of what they can claim tax relief for and what they can’t because tax relief rules can be incredibly confusing to those who are new to them. To provide assistance, our website holds a wealth of information about tax relief as well as a calculator to help people work out how much they could claim”.  In order to allow workers to cover some of their increased energy costs, HMRC allows them to claim a tax relief allowance of £312 for this current tax year. However, there may be situations where this allowance does not cover the additional costs of homeworking, in which case actual costs can be claimed. Additional metered water expenses for those who find themselves using more water as a result of being at home more may also be claimed. These expenses must be supported by proof of cost and must be proportioned to take account of extra business use only. Tax relief is not permissible on personal expenses.

In addition to extra energy and water costs, employees may have been required to purchase equipment or tools to allow them to work from home. Redfern explains “In order to facilitate homeworking, it is possible that workers have been expected to provide themselves with office equipment or furniture so that they are able to perform their job adequately from home and this may be claimed as tax relief. Receipts will be required as evidence of the expense – a bank statement showing a purchase from IKEA or the like is not considered to be sufficient proof for HMRC. For purchases such as laptops, this may be required to be claimed as capital allowances ”. Smaller purchases and tools, which are expected to last for less than two years do not have to be claimed as capital allowances. Travel to one’s usual workplace is not allowable, even if the individual has been working from home exclusively for the past year.

There are some expenses which cannot be claimed as tax relief, such as rent or mortgage interest, council tax, water rates and broadband costs, unless metered. Redfern stated “Everyone has certain costs related to simply living – such as accommodation costs – and HMRC does not entertain claims for such costs. We all need somewhere to live, we all need food, and these expenses do not change whether we work from home or not. Similarly with internet charges, unless it is a dial-up connection, the cost remains the same whether you are using it to work from home or for personal usage”.  Tax relief can only be claimed if the employee has not already been reimbursed by their employer as it is intended to ensure that workers are not left financially disadvantaged.

The DSR Tax Refunds Ltd website has more information about working from home expenses as well as a tax relief calculator so that employees can calculate how much tax relief they may be entitled to claim.

About DSR Tax Refunds Ltd

DSR Tax Refunds Ltd is a firm of tax preparation experts who specialise in CIS tax returns for construction workers working within the Construction Industry Scheme (CIS) as well as employees who are eligible to claim a tax refund for their work-related expenses, including employees working from home as a result of the Covid19 pandemic. Their friendly and helpful team can help with all relevant paperwork to ensure clients claims are handled in an accurate and efficient manner.

For more about DSR Tax Refunds Ltd, visit https://tax-refunds.co.uk/

For media enquiries, please email [email protected] or call 0115 795 0232.

DSR Tax Refunds Ltd

Registered Office: Ground Floor, Seven Mile House, 1 Mansfield Road, Papplewick, Nottingham, NG15 8FJ

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