Working from home? How to claim tax relief for your work expenses

Employers can reimburse extra expenses

Since 6 April 2020, the weekly tax-free payment or reimbursement of employees was raised to £6 (£26 per month). Your employer does not need to justify the extra expenditure and you don’t need to keep a record of these expenses.

If you can provide evidence that the above rates are too low, it is possible to increase the tax-free amount due. There are two ways to do this:

1. Calculate a scale rate payment

If HM Revenue & Customs (HMRC) approves, your average extra expenses can be reimbursed. You may also have an arrangement to increase this rate on an annual basis. Once your scale rate has been confirmed with HMRC, you will no longer need to keep record of such expenses.

2. Reimbursement of additional expenses by your employer

If HMRC do not permit the scale rate option, you can also request your employer to cover your additional costs. It is likely that your employer will insist on evidence of your additional expenses before they make a decision. The following additional expenses can qualify for reimbursement:

• Heating and lighting
• Insurance
• Metered water
• Telephone or internet access charges
• Essential office equipment (if not supplied by your employer)

Please note: these costs will only be reimbursed if they are supplementary expenses owing to working remotely. Pre-existing or consistent expenses will not qualify.

According to guidelines set out by HMRC, to qualify for these benefits, you need to meet the following conditions:

• You have established an official agreement with your employer to work remotely
• You are consistent in adequately fulfilling your work responsibilities from home

Actively seek tax relief

If your employer refuses or is unable to reimburse some or all your additional costs, we recommend this option that you apply to HMRC for tax relief. This will only be granted if you provide proof that such additional expenses are specific to and necessary for the work you are doing remotely.

Reimbursement of your additional costs by HMRC

Costs covered by HMRC are similar to those that an employer may be responsible for. HMRC will not, however, reimburse your supplementary insurance, telephone or internet expenses.

You may claim tax relief from HMRC on the following:

• Heating and lighting
• Metered water
• Essential office equipment (if your employer fails to reimburse you)

If you are going to claim tax relief on office equipment purchases, you may do so through capital allowances. You will need to ensure that you meet one or more of the following prerequisites to prove that your home is your current place of work:

• You consistently meet the requirements set out in your contract of employment while working from home
• Your work responsibilities demand the use of relative facilities or equipment unavailable to you at your home
• You were instructed by your employer to work remotely and were not given the choice to work from your employer’s property

Claim the allocated fixed rate from HMRC

It is often impractical or not possible to calculate your additional costs. If this is the case, you may claim a flat rate of £26 per month (if you are paid on a monthly basis) or £6 per week (if you are paid on a weekly basis). Although you’re not required to keep a record of your expenses in order to claim, it’s always best practice to keep proof in the form of invoices received or proof of payments made.

This flat rate does not include business calls. You can make a separate claim for this expense but this must be supported by evidence.

How to claim tax relief for remote work

If you usually fill out a Self Assessment, you may include your claim with this form. However, most people will need to complete a P87 tax form.

The P87 tax form allows you to claim for tax relief on expenses relative to your responsibilities of employment. To be eligible for this, you will need to comply with the following:

• You do not have to submit an annual Self Assessment tax return
• You are an employee who has spent your personal funds on permitted additional employment expenses and your employer is unable or refuses to reimburse such costs
• Your permitted additional employment costs are below £2,500 for the tax year

You may complete this form online through your Government Gateway account, or you may fill out a physical form and post it to HMRC. If your application is successful, HMRC will likely change your tax code. This means that you will pay less tax over the year rather than getting a once-off refund.

Claiming tax back effectively can take time and admin. Don’t let this stop you from getting what you are owed. An expert tax refund agent will ensure that you get your full tax refund quickly and hassle-free. Start the process to get your cash back by filling out our Tax Refund Claim Form or by contacting us on accounting@sableinternational.com.