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Were you one of the many people who claimed homeworking expenses as a result of the coronavirus pandemic lockdowns? If so, you need to know those rules have now changed and reassess whether you can still claim.
The coronavirus pandemic lockdowns changed working almost overnight, with many employees having to adapt quickly to working from home. This was supported by some temporary tax changes that allowed many more people to claim tax relief on their homeworking expenses. But those changes came to an end in April 2022 and we are now back to the previous rules.
Although the rules have reverted back to pre-pandemic, working patterns may not have. Since Covid-19 many people have changed the way that they work. Remote working and hybrid working (at home for part of the week) have becoming increasingly common, so the homeworking situation is not always clear cut. What are the current rules around homeworking expenses and how do they apply to different working patterns?
For the tax year 2019-20 HMRC took a lenient view on homeworking expense claims for employees. If you were working at home, on a regular basis, for all or part of the time, as a result of coronavirus, you could claim tax relief on homeworking costs.
You didn’t have to be working from home for the whole year. However, the homeworking had to be required as a result of coronavirus e.g. because of lockdowns or because the workplace was closed, for at least part of the tax year, rather than by choice.
Even a single day working from home was sufficient to claim for the whole year, providing it was required as a result of coronavirus.
Most people claimed the HMRC flat rate of £6 per week (£312 per year) against their tax, or alternatively could claim additional actual costs. This could be done via the self-assessment tax return or using online microservice launched by HMRC in October 2020.
During the pandemic employees could also claim tax relief on equipment purchases for work. Your employer could reimburse the cost of equipment, without deducting income tax and national insurance. There was also no issue of taxable benefits in kind if you kept the equipment at the end. The purchase just had to meet the following conditions:
The rules were expected to return to normal in 2020-21, however during that year there were still many workplaces impacted by Covid-19. Therefore, HMRC allowed homeworking expense claims and equipment reimbursement to continue for that tax year on the same basis.
For 2021-22 onwards we are back to the original pre-pandemic rules, which are stricter in many areas.
There are two scenarios to consider, which have slightly different rules:
The majority of pandemic homeworking claims made in 2019-20 and 2020-21 were employees claiming tax relief from HMRC for homeworking expenses that hadn’t reimbursed by their employer. Claims were made directly through the self-assessment tax return or through the HMRC microsite.
It’s still possible to claim tax relief for the homeworking expenses that haven’t been reimbursed, but now under much more limited circumstances. The following factors must apply
You cannot have chosen to work from home, it must be necessary as a result of the factors above, rather than a choice.
If you have a voluntary working from home arrangement and aren’t being reimbursed for your homeworking expenses by your employer, it may be hard to claim tax relief from HMRC. You would likely no longer meet the stricter post-pandemic criteria.
If you do meet the criteria to make a direct claim, it can still be done through the self-assessment tax return or HMRC’s microservice. If you aren’t registered for self-assessment and use the microsite, HMRC will generally give you tax relief through a change to your tax code for the current tax year.
Your employer can choose to reimburse some or all of your additional homeworking expenses through payroll. The rules around these payments are much less strict than if you are claiming directly and apply to voluntary homeworking arrangements as well as necessary homeworking.
In order for the payment to exempt from tax you need to:
You can be fully home working or hybrid, working from home part of the week. The homeworking must be frequent and follow a pattern e.g. two days per week (although they don’t have to be the same two days each week).
Informal homeworking does not qualify. This includes working from home occasionally or doing work at home in the evenings or at weekends.
There are two main methods for paying home working expenses, the HMRC flat rate or the actual costs
The simplest method is to use the HMRC flat rate of £6 per week for employee homeworking. This is £26 per calendar month or £312 per year.
Employers can pay this without any further evidence of individual expenses as long as you meet the criteria for homeworking.
If you’re a hybrid workers, only working from home part of the week, you can still be paid the full £6 per week. You don’t have to pro-rata in amount.
Instead of the flat rate, you can be paid for any direct increase in home costs as a result of homeworking. This would be for expenses such as heat and light, insurance, metered water, telephone and broadband. You need to be able to provide evidence of the original cost and the increase.
Any costs that would stay the same whether or not you worked from home, can’t be included e.g. rent, council tax.
Actual costs can be difficult as providing evidence of the increase that can be attributed to homeworking is not always straightforward. The rapidly rising prices can add further complexity to this situation.
An alternative is a scale rate payment that your employer agrees with you based on average costs. This rate can then increase each year in line with inflation.
The rules around equipment expenses have also reverted back to their pre-pandemic form. If you need home office equipment, you can no longer just go out and buy it, then claim the money back. There are now tax consequences depending on who pays for the equipment.
If your employer purchases the equipment and there is no significant private use, then there are no adverse tax consequences for you as the employee. However, if you make use of the equipment personally as well as for work, you may end up with a taxable benefit in kind. You might also have a benefit in kind if your employer lets you keep the equipment during or at the end of your employment.
If you buy the equipment and your employee pays you back, this is treated as additional employment income and is subject to tax and national insurance. This is different to the situation in 2019-20 and 2020-21 where there were no tax consequences.
If you buy the equipment but your employer does not pay you back, then you can claim tax relief on that expense. Claims can be made through the self-assessment or via HMRC’s microservice. However, the rules around what can be claimed are quite strict. The equipment needs to be necessary for the performance of your duties, with strong emphasis on “necessary”. A laptop would be fine, but office furniture is not viewed as necessary. Again, this is different to during the pandemic when it was possible to claim for a much wider range of equipment as long as it was being used primarily for work.
The homeworking expenses and equipment rules are now much stricter than they have been over the last couple of years.
Handy Hint – if you aren’t sure whether you can claim or not, HMRC have an expense claim tool as part of their microservice.
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