Tax free allowance for working from home

15th October 2020

Working from home has become the new norm for many workers under Covid-19, and since 6 April 2020 employers have been able to pay employees up to £6 a week (£26 per month) tax-free to cover their extra domestic costs. 

But where employees have not received any home expense payment from their employer, they can apply to receive the tax relief directly from HMRC via its new online portal .

Home workers can claim relief based on the rate of tax they pay.

So an employee paying 20% basic rate tax claiming the £6 a week would receive £1.20 a week in tax relief (20% of £6 a week) towards the cost of their household bills. A higher-rate taxpayer would receive £2.40 a week (40% of £6 a week).

Over a twelve-month period the employees could reduce their tax by £62.40 or £124.80 respectively.

Once an application has been approved, the online portal will adjust the worker's tax code for the current tax year to 5 April 2021 and they will receive the relief through their salary until March 2021.

HMRC is also reminding employed workers that they may be able to claim relief for other work-related expenses, such as the cleaning of work uniforms in the case of healthcare workers.

Workers can also check with HMRC to see if they can claim relief for such items as uniforms or tools repairs or replacements, and for the payment of fees and subscriptions for their work.

Further information

Find out more about claiming tax relief on work related expenses.

Access the online portal for working from home expenses.

Employees do not need to provide evidence to show their bills have increased unless they are applying for tax relief on costs above the £6 per week flat rate.

Employees may be able to claim tax relief on the cost of:

  • expenses for working from home
  • repairing or replacing small tools needed to do their job (for example, scissors or an electric drill)
  • cleaning, repairing or replacing specialist clothing (for example, a branded uniform or safety boots)
  • business mileage (not commuting)
  • travel and overnight expenses
  • professional fees and subscriptions

Employees can check if they are eligible for tax relief on their expenses and claim online.

Employees could alternatively receive the tax relief as a lump sum payment if they wait and apply once the current tax year has ended.

It is understood that when the pandemic is over, the above rules will revert to the previous position under which the allowance is tax-free only where paid by employers.

HMRC has confirmed to the ICAEW that the £6 per week/£26 per month is available in full, even if an employee splits their time between home and office: i.e. it does not need to be pro-rated over the number of days spent each week at home and in the office.

It is also understood that where an employee who has told HMRC that they are working from home returns to working in the office, there is no requirement for the employee to tell HMRC.

For more information, please contact your usual Bishop Fleming advisor.

For further help, please check out our Business after COVID-19: Transition Knowledge Hub.

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