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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!

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23 Common Tax Deductions for Small-Business Owners

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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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.

Related Content

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• 2023-2024 Federal Tax Brackets and Income Tax Rates

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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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Tax Tips for Employees Who Work at Home

Important: Article Summary

Since the 2018 tax reform, at-home expense deductions for employees have been reduced but remain for self-employed workers.

Can you claim work from home tax deductions?

Who can claim tax deductions when working from home, tax tip 1: deduct home office expenses if you only worked for yourself or worked for yourself in addition to a w-2 job., tax tip 2: keep thorough records and save receipts., tax tip 3: consider the simplified home office deduction to ease your record keeping., tax tip 4: consider taking the direct method if it provides a bigger deduction., tax tip 5: each year you can switch between the simplified and direct method to take the biggest tax deduction., how do you calculate the home office deduction as a self-employed person, can i use the same space for my w-2 job and side gig and still claim the deduction, the best of both work worlds.

Key Takeaways

• Employees who work from home can no longer claim tax deductions for their unreimbursed employee expenses or home office costs on their federal tax return.
• Prior to the 2018 tax reform, employees could claim these expenses as an itemized deduction.
• Self-employed workers can claim eligible deductions for business expenses and for working out of a home office.
• You can choose between two methods for calculating your business use of home tax deductions, the simplified and direct methods.

If you’re an employee, you can claim certain job-related expenses as a tax deduction, but only for tax years prior to 2018. For tax year 2018 and on, unreimbursed expenses and home office tax deductions are typically no longer available to employees.

The number of employees working from home has grown considerably due to the COVID-19 pandemic. Just a few years ago, these employees may have been eligible for tax deductions that were unavailable to in-office employees. Now, with only a few exceptions, only self-employed people are eligible to claim tax deductions when working from home.

Before you claim these deductions, be sure you meet the IRS’ criteria, or you could face additional taxes or penalties.

Since the 2018  tax reform became law, generally only self-employed people can claim tax deductions when working from home. Working as an employee and for yourself doesn’t necessarily disqualify you from taking these tax deductions. The deductions have to be related to your self-employed income rather than your employee work.

Even in this situation, you’ll generally need to make sure your home office is only in support of your self-employment and not your job as an employee. For other expenses such as phone and Internet, you can split these between working for yourself, as an employee or as a personal expense. For deducting home office space on your tax return, the IRS requires these expenses to be used exclusively for your self-employed business.

To claim a home office as a business expense, you must use part of your home as your principal place of business or a place where you regularly meet greeting clients or customers or store inventory. If your home office is a separate structure then it does no have to be your principal place of business.

To understand more about how you can claim tax deductions when working from home, take a look at the following tax tips for employees.

Many employees work from home because it's convenient for their employer. For example, a salesperson who lives in a different state than company headquarters, may work from home rather than the company paying for office space.

If you only worked as an employee during the tax year, you can't typically claim home office expenses related to your work. If, however, you worked for yourself in some capacity, you might be able to deduct home office expenses.

If your  home office is used exclusively and regularly for your self-employment, you may be able to deduct a portion of your home-related expenses, such as mortgage interest, property taxes, homeowners insurance, and utilities. You do not have to meet the exclusive use test if you claim the deduction for using your home as a daycare facility.

You need to keep accurate records of any expenses you claim as a deduction. The IRS recommends keeping a written record or log book in the event any questions arise about your deductions.

You should also save proof of payment for any tax-related expenditures. This proof may be in the form of a credit card or bank statement, canceled check, or itemized receipt. If you paid in cash, the receipt should include the payee's name, the date of the payment, and the amount. Digital records will usually satisfy this requirement as long as you can retrieve them when needed.

TurboTax Tip: Keep copies of all tax-related items and documents for at least three years. This includes receipts, invoices, tax forms, and any other supporting documentation.

When eligible to claim the home office deduction on your taxes, you have two ways of claiming the deduction: the simplified method and the direct method.

The simplified method is just that: simple. You can use this method to determine your home office deduction on your return by expensing $5 per square foot of your office, up to 300 square feet for a maximum of $1,500. The other option, the direct method, is more involved but could result in a bigger deduction.

The other way to claim the home office deduction is by using the direct method. This involves tracking all of your home office expenses in addition to any costs related to repairing and maintaining the space. Further, you can claim deductions for a portion of other expenses based on the proportion of the space to the rest of your residence.

To get the biggest deduction possible, you may need to calculate your deduction using both the direct and simplified methods to see which one comes out ahead for your taxes.

You don’t need any reason to switch from one method to the other year-to-year.

Calculating the home office deduction under the simplified method is straightforward. You take the square footage of your home office used exclusively for your self-employed business and multiply it by $5 per square foot up to a maximum of $1,500 per year.

The direct method, by comparison, requires more work on your part throughout the year and when preparing your return. But, it may also save you more on your taxes.

The direct method determines the home office tax deduction based on the percentage of your home office square footage to your entire home.

Divide the square footage of your home office by the square footage of your entire living space to calculate the percentage of your home that is dedicated to your home office. This percentage is then applied to your home expenses to determine what amount might be a business expense.

You can claim a percentage of expenses such as rent, mortgage interest, utilities, insurance, and repairs. Depreciation is also an allowable expense for a home that you own.

For example, if your office is 250 square feet and your home is 1,000 square feet, you'd deduct 25% of your allowable expenses (250/1,000 = 0.25). If you had $10,000 in eligible home-related expenses, you could claim up to $2,500 in deductions.

The direct method has no maximum deduction limit, making it more attractive in some instances than the simplified method. You may consider calculating both methods to help determine which method is best for your situation.

When using the direct method, you also need to account for depreciation of a portion of the house if you own it. You don't need to worry about calculating this when using the simplified method for taking the home office tax deduction.

If you use your home office for your W-2 job and your side gigs, you won’t be able to claim your home office as a tax deduction.

The IRS allows you to deduct expenses for having a dedicated space where you regularly and exclusively conduct your self-employed business. This is true whether you live in a house, apartment, condo, mobile home or boat, as well as external structures like a barn, garage or workshop.

If you have separate spaces for your employee job and for your self-employment work, then the eligible expenses for your self-employment space can still be deductible even though the expenses for your employee space isn't.

One option for employees who must pay for business expenses related to working at home, is to seek reimbursement from your employer. Reimbursements are typically tax-free as long as your employer has an accountable plan. This means they require you to submit an expense report or some other means of accounting for your expenses. Being reimbursed for an expense is almost always better than taking a deduction for the same expense on your taxes.

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The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.

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Working from home 2024: HMRC tax relief explained

Don’t miss an article.

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?

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.

How to claim the working from home tax relief 2023/24

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.

Give your company a friendly nudge

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.

Get the Pleo Digest

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How to claim the working from home tax relief.

| Editor-at-large

Updated June 14, 2024

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Were you told by your employer to keep working from home even after the pandemic? If so you might be able to apply for tax relief up to £140 in a tax year .

If you worked from home during the 2020/21 and 2021/22 tax years but failed to apply for the rebate, you can still do so because claims can be backdated .

In the article, we explain:

• How does WFH tax relief work?
• How to claim WFH tax relief
• When is the deadline to apply for the relief?
• Who is eligible and how do you check?
• How much will you get in WFH tax relief?

Read more: Highest-paying jobs in the UK

What is WFH tax relief?

As a result of the pandemic, millions of people were told to work from home by their employers.

While commuting costs will have fallen, other bills such as your gas, electricity and internet are likely to have increased as a result of you spending more time at home.

To help cover these extra costs, HMRC allows you to claim tax relief. You can do so using a designated online portal .

Around three million people made a claim for the 2020/21 tax year.

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How to claim working from home tax relief

To claim for the working from home tax relief:

• Head to the government’s microservice portal and answer the eligibility questions
• During this process you also be asked about other work-related expenses that you could claim for too
• your national insurance number
• a recent payslip or P60 or a valid UK passport
• Once logged in, state the date that you started working from home
• If you have been working at home since the start of the first lockdown (March 23, 2020 ) put that date in and you will get a rebate for two whole tax years (April 6, 2020 to April 5, 2021 and April 6, 2021 to April 5, 2022) and the two weeks extra
• If you had claimed for 2020/21 tax year, you will not automatically receive a refund for the 2021/22 tax year. You must again use the microservice portal to apply.

NOTE: If you pay tax by self-assessment, you won’t be able to use HMRC’s online portal; instead apply for the tax relief in your tax return . 

How is the tax relief paid?

You can backdate a claim to cover the first tax year of the pandemic (2020/21) and the two weeks before, as well as the second year (2021/22), if you have been working at home since the first lockdown was announced on March 23, 2020.

Where an employee meets the criteria to claim tax relief for working from home and makes a claim for previous years, HMRC will issue a tax refund.  This is usually in the form of a cheque.

How much tax relief will I get?

There are two options to getting the tax relief:

• Your employer: can cover your expenses and pay them into your wages tax-free
• You claim: given the difficult time that many businesses have faced, you are more likely to have to claim tax relief from HMRC rather than your employer covering the costs

NOTE: You can’t do both. You will be unable to claim tax relief if your employer is paying your expenses.

If you do claim yourself, how much you will get depends on the rate of income tax you pay:

• Basic-rate taxpayers get £1.20 a week (tax relief of 20% on £6) = £62.40 per tax year
• Higher-rate taxpayers receive £2.40 a week (tax relief of 40% on £6) = £124.80 per tax year
• Top-rate taxpayers will receive £2.70 a week (tax relief of 45% on £6) = £140.40 per tax year

If you didn’t claim for last tax year or the one before but worked from home, you can backdate your claim. HMRC will accept backdated claims for up to four years.

Working-from-home tax relief is an individual benefit, so a couple or a group of flatmates can all claim it if you are all working from home.

You can use our income tax calculator to work out your tax payments.

What is the deadline to apply for WFH tax relief?

If you worked from home during the 2020/21 and 2021/22 tax years but failed to apply for the rebate, you can still do so. HMRC says it has no plans to close the online portal or microsite.

Claims can be backdated, meaning that you may be eligible for up to £280 tax relief if you claim for both last tax year and the one before (essentially the two years during the pandemic). Few workers will be able to claim for the current tax year.

HMRC confirmed that you have until the April 5, 2025 to make claims for 2020/21 tax year, and until April 5, 2026 make claims for 2021/22.

Can I still claim for working from home tax relief?

Most people won’t be eligible for this relief any more as it is no longer a legal requirement to work from home.

You can claim if you have additional household costs as a result of having to work from home and your employer has not already paid these extra expenses.

In order to claim for this, one of the following must apply:

• You can’t perform your job on your employer’s premises because they don’t have the facilities; for example, your employer has a small office with no space for you to work there
• Your job requires you to live so far from your employer’s premises that it would be unreasonable for you to travel there every day; for example, the workplace is in Birmingham but your job requires you to work in Scotland
• Or government restrictions mean you must work from home; though these restrictions have now been removed

To claim tax relief as an employee, you cannot have just chosen to work from home.

HMRC also warned that it is not a sufficient reason to warrant working from home tax relief if employers simply tell employees to work from home. So if you are hybrid working (that is, working from home for part of the week), you can only claim tax relief if there is a lack of appropriate facilities on your employer’s premises to do your job.

The government has outlined several examples where staff can claim working from home tax relief.

Does my tax code change if I work from home?

Yes, if you are in receipt of the work from home tax rebate then your tax code will change.

You can usually find your tax code on your pay slip. The most common tax code is 1275L. The number represents the personal tax allowance for most earners in the UK, which is £12,750 – this is the amount you can earn in a year before you have to pay tax.

So if you’re in receipt of the tax rebate, this code will change to reflect the fact that you have a larger personal tax allowance. Although bear in mind that this number could be different for other reasons: for example, you receive a different tax benefit such as a company car.

If you have claimed the working from home tax benefit in the past and you’re no longer eligible, you should check your PAYE tax code to ensure it is correct.

It’s important to check because if you continue to claim while no longer eligible, you will be forced to pay additional tax at the end of the tax year.

If you are receiving the working from home tax rebate when you shouldn’t, get in touch with HMRC to get your tax code changed.

Who is eligible for WFH tax relief?

During the pandemic and, in a few cases since, employees were allowed to claim tax relief on working-from-home expenses but you need to check first that you:

• Were told to work from home by your employer. You cannot claim tax relief if you chose to work from home
• Have had to pay higher costs related to working from home (but you don’t need to show evidence of this)
• Are not receiving expenses directly from your employer to cover the extra costs of working from home

Do you pay tax by self-assessment? You can still claim the tax rebate but you need to apply for it in your tax return rather than through HMRC’s online portal.

If you are still unsure whether you are eligible, there is a government tool that can help you find out.

NOTE: If you are self-employed, you can’t claim for the tax relief because you work for yourself. However, you can claim expenses on your tax return.

If you are new to tax returns, check out our guide to self-assessment .

What if the rebate doesn’t cover my extra needs?

If the sum provided does not come close to the extra costs that you have incurred, you can apply for relief on higher sums.

There are two options:

• If you complete a self-assessment form each year simply add the claim to that
• Fill in this online form or, if you prefer to claim by post or phone, use the the P87 form that allows workers to claim back expenses up to a maximum of £2,500

HMRC says that additional costs include things such as:

• Metered water bills
• Home contents insurance
• Business calls
• 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 rent, council tax, or your chocolate digestive habit.

You will need:

• Your employer’s name and PAYE reference (which you can find on your payslip or P60)
• Your job title
• Receipts (to provide evidence of these extra costs)

You won’t get back the full cost of the extra expenses, only tax relief on the total. For example: if you have spent £500 on extra costs, as a basic-rate taxpayer, you will see your net wages increase by 20% or £100.

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WFH tax relief vs Home Office Allowance: what’s the difference?

• Last updated 22 Mar 2023

Since many of us worked from home due to the pandemic, there was a rise in extra costs. These included heating, electricity, buying office equipment, and so on.

Although the coffee was infinite and the slippers were fluffy, WFH increased expenses for many families which was something HMRC decided to help with.

Can I claim both home-working allowances?

Good question! No, you can’t claim both. The reason for that is that these two allowances, although they seem very similar, are different in who they serve. Here’s how.

The Home Office Allowance is specifically for self-employed people who work out of their home, which includes those who file a Self Assessment. Try and do some calculations beforehand so you know what to expect.

The second, the work from home tax relief, is for those who would usually go into work but have to work at home instead. It can only be claimed if you’ve not decided yourself to work from home. You also cannot claim this if you do your tax return via Self Assessment.

OK, what is the working from home tax relief?

The work from home tax relief is just that –  a tax relief that people can claim back on expenses incurred from working from home. Specifically, it’s expenses you wouldn’t have if you were working from the office. Although travel and commuting costs may lessen, expenses such as heating, lighting, and metered water may have increased. 

Who is the relief for?

Unfortunately, not everyone is eligible to claim. According to HMRC, in order to claim the tax relief for working from home, you must:

• Have be required to work from home; you’ve not decided that you prefer it to the office
• Not pay tax via Self Assessment
• Not already have your expenses paid by your employer

How much will I get?

The amount of HMRC working from home tax relief you get is based on the rate of tax that you pay. This means it varies from person to person. HMRC allows you to claim £6 a week from April 2020 and states that you do not need to keep proof of your costs. Alternatively, you can claim the exact amount you’ve spent and claim tax relief against it.

Here’s an example:

If you claim £6 a week and you pay the 20% basic tax rate then the weekly total you will receive is £1.20 in tax relief. This equates to about £60 for the year.

Claim tax relief for working from home

To claim the relief, just go to HMRC’s microsite and apply there directly. You will need your Government Gateway username and password to log in. If you don’t already have one, you’ll need the following to create one:

• National Insurance Number
• A recent pay slip, P60 , or valid passport 

What is the Home Office Allowance?

If you’re self-employed and you work from home, then you are eligible to claim the flat rate Home Office Allowance . The amount you can claim depends on how many hours you work from home each month.  The method to calculate the allowance is done through a system called simplified expenses . 

Who is the Home Office Allowance for?

The Home Office Allowance is for people that are self-employed (sole traders) that use their home to work from, instead of an office. This also includes those who pay tax through a Self Assessment. As a result of your home also being your office space, there are certain things that you can expense. 

This includes:

• Accounting costs
• Bookkeeping costs
• Home office equipment
• A portion of your utilities
• Any other work-related costs

It’s pretty simple – literally.  Because the Home Office Allowance is calculated through simplified expenses, it’s a flat rate charge that you can claim if you work over 25 hours or more a month from home. The following rates do not include internet or telephone expenses. 

For other expenses, you wouldn’t use the simplified expenses method and what you expense varies from person to person. You can claim expenses like these by working out the exact costs. 

Great! How do I claim?

You’ll be able to claim the Home Office Allowance through your Self Assessment. Along with your main SA100 form, you’ll need to fill out the SA103 as well, detailing the expenses and allowances.

However, if you want to work out your exact costs, you will need to whip out those maths skills (or lack there of). Not to worry, nothing the calculator on your smartphone can’t help with. Be aware that the number of rooms in your property also impacts how much you can claim. It might make more sense for you to claim based on your household usage, so let’s get into it.

How do I calculate based on my household usage?

Add up your household fixed expenses (mortgage/rent + council tax + bills… etc)

Multiply this number by the space in your home you use for work. This is usually the number of rooms you use for work divided by the total number of rooms in the house.

Step 3: 

Multiply the number you get in Step 2 by the percentage of time (in hours) you use that space for work purposes. To calculate this number, divide the amount of time you use this space for work by the amount you use it in total.

Confused? Yep, you’re not alone.

Here’s the calculation in image form to make it a bit clearer.

…but if you want to avoid doing any maths, you can head to the HMRC website where they have a simplified expenses checker to help you decide what the best allowance for you is and which method you should use. 

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Does working from home have any tax savings via the home office deduction.

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Who can take the home office deduction for 2021?

The real estate market is hot, and home prices are skyrocketing, rents are too darn high, inflation is even hitting your utilities like gas, electric, internet and streaming services. For those of us who have been working from home for the past two years, you may be wondering if you can get a bigger tax break from all these increased expenses? Some of you may be eligible for the Home Office Deduction, while others may be out of luck. Keep reading to find out if you can lower your 2021 taxes with the often-valuable Home Office Tax Deduction.

The Trump Tax Plan Severely Limited the Home Office Deduction

Before the implementation of the Tax Cuts and Jobs Act (TCJA), aka the Trump Tax Plan , millions more Americans were eligible for the tax benefits of the Home Office Deduction. Sadly, for your pocketbook, the home office deduction was eliminated for those of you working as W-2 employees. Even if you work from home 100% of the time, you are not eligible for a tax deduction for your home office expenses. As it stands now, you must have self-employment income to be able to take the Home Office Tax Deduction.

Who Can Take the Home Office Deduction for Tax Year 2021?

You can likely benefit from the home office deduction if you are a business owner or have self-employment income and work from home. The home office deduction can be valuable because it is based on expenses you would likely already be paying. Think mortgage, property taxes, utilities and even home maintenance.

Best Tax Software Of 2022

Best tax software for the self-employed of 2022, income tax calculator: estimate your taxes.

The Home Office Deduction has a reputation for being an audit red flag. However, assuming you are eligible and have kept good records, you should take advantage of the tax-saving from the home office deduction. Again, I must shout, if you are a W-2 employee, you will not be eligible for the home office deduction thanks to the tax plan from former president Trump.

What Qualifies for the Home Office Deduction in 2021?

Qualifications for the home office deduction can be determined by referencing IRS Publication 587. Is a portion of your home used "exclusively and regularly" as your principal place of business? Do you have "a place where you meet or deal with clients, take Zoom calls, see patients, or customers in the normal course" of your business? If you answered yes, you most likely qualify for the home office deduction.

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What "exclusive use" entails may vary slightly from business owner to business owner. A YouTuber making content on the living room couch in front of the TV will likely never qualify to deduct the cost associated with the entire living room, but they may be able to deduct a portion of the room. However, if they have a room used exclusively for filming, that couch might be the principal place of business; perhaps the entire room could be used to calculate the home office deduction.

Especially during the past two years during COVID, many of you have likely spent some time working from a desk or table or even commandeering a guest bedroom as your new home office. I've even spoken with people who've been stuck working in closets or hallways. Some of this is to get some distance between two parents working from home while kids are taught at home.

Does My Home Office Need to Be an Entire Room?

According to the IRS, your home office needs to be a "room or separately identifiable space." The good news here is that your home office space doesn't have to be marked off by a permanent division of some kind. Your office does not have to be an entire room. It could be a desk in the corner. That being said, your home office setup should resemble an office or workspace. This will vary from business to business. You might expect a different setup for the office of a painter versus the office of a CPA.

2021 saw record numbers of people working from home.

How To Determine Your Principal Place of Business for the Home Office Deduction

Many small business owners work across several locations. This could be a WeWork, Starbucks, airplane, home office combination. To get a tax deduction for your home office, part of your home must be your principal place of business for that specific trade or business.

How do you determine if your home office is your principal place of business? Consider the relative importance of your various business activities and where they are completed. For your home office to pass the "principal place of business" test, you must use it exclusively for "administrative or management activities," and you must not have any other location where you also conduct a substantial amount of "administrative or management activities," according to the IRS.

There has been a wave of new small businesses popping up during the COVID pandemic. The 2021 tax year may be the first time you flirt with taking the home office deduction. For others, you may have been running your business for years but, for some reason, have never taken the home office deduction.

Make sure to take advantage of the tax savings from the home office deduction if your business qualifies. Assuming you have kept up with your bookkeeping through the year, figuring out your home office deduction should be a breeze, that is, once you've established that you are eligible. Be proactive with your tax planning; it can be the difference between making ends meet and going out of business. Work with a trusted financial planner and tax preparer to help keep as much of your hard-earned money as possible.

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Last updated: 15 February 2022, to include details of temporary 2022/23 easement and generally refresh text.

Following the outbreak of COVID-19 in early 2020, homeworking became the norm for many millions of people. As a result, the Government made temporary changes to homeworking reliefs. Most of these concessions came to an end on 5 April 2022, and for 2022/23 we have (with one small exception) returned to the pre-pandemic rules. The challenge now for many employers and employees is how these rules should be applied in the light of changed working patterns and particularly hybrid working.

This article covers both current and past positions in respect of homeworking. 

Topics covered in this note: 

Employer reimbursements of homeworking costs

• Claiming tax relief as a homeworking employee
• Provision of office equipment.
• Temporary easements for tax relief - 2020/21 to 2021/22
• Temporary easements for home office equipment - 2020/21 to 2021/22   

2022/23 onwards

Since 2003, employers have been able to make tax-free payments to help employees cover their reasonable additional expenses incurred while working from home. Eligible payments are not subject to either income tax or national insurance.

Which employees are eligible?

To be eligible, the employee must be carrying out the duties of their employment under  homeworking arrangements . This means that the employee is regularly performing some or all of their duties at home.

HMRC guidance  notes that they will accept an employee is working at home regularly where it is frequent, or follows a pattern, such as working at home for two days of every week. In the example of an employee working two days a week at home, HMRC will still consider it to be regular even if the employee varies the days which they work at home each week. 

Informal working at home which is not by arrangement does not count as homeworking – for example taking work home in the evenings will not qualify the employee for tax-free reimbursement of costs. There must be an arrangement to work at home and not at the employer’s premises, and it is good practice for this to be in writing.

What costs can the payments cover?

The reimbursements can only cover reasonable additional costs incurred by the homeworking employee. There are two main approaches.

Firstly, the employer can pay the following fixed amounts:

• £6/week for weekly paid employees (£4/week prior to 6 April 2020); or
• £26/month for monthly paid employees (£18/month prior to 6 April 2020).

The advantage of paying at these rates is that there is no need for the employer to justify the expenditure and the employee does not need to keep records of their additional costs.

The weekly, flat-rate amount applies equally to part-time or hybrid workers and it is not necessary to pro-rate it because the employee does not work at home full-time.

If the flat-rate is not appropriate, then a larger tax-free amount can be paid subject to provision of evidence for the additional costs. There are two ways to do this.

The first approach is to calculate a scale rate payment which reimburses the average additional costs of working at home. It is possible to agree to increase this annually. Once the scale rate has been established following  HMRC guidance , then employees are not required to keep subsequent evidence of costs.

Alternatively, the employer can reimburse the actual additional costs incurred by the employee. Allowable costs include:

• additional heating and lighting costs
• additional insurance
• metered water
• telephone or internet access charges
• business rates (if applicable)

Only the increase in costs incurred by the employee can be reimbursed . Costs that would be the same whether or not you work at home cannot be included. Such costs might include:

• mortgage interest or rent
• council tax
• water rates

For costs such as broadband internet connection, HMRC say that if the employee is already paying for a connection before starting working from home then this is an existing expense and cannot be reimbursed tax-free. If, however, the employee is not connected to broadband and needs a connection to work from home, then this would qualify as an additional cost which the employer could reimburse tax-free. 

The same principles will apply for the cost of a domestic landline rental. Only additional costs incurred by the employee as a result of homeworking can be reimbursed by their employer tax-free.

The employer is also not permitted to reimburse tax-free any costs that put the employee in a position to work at home such as building alterations. However, the employer can provide office equipment and office furniture as tax-free benefits in kind – see below for further commentary.

<back to top>

Claiming tax relief as a homeworking employee

If an employer does not wish to reimburse some or all of a homeworking employee’s extra expenses, then the employee may well look to claim tax relief. However, homeworking employees are not automatically allowed tax relief on their extra costs. Tax relief for extra costs under s336 ITEPA 2003 is only available if such costs are incurred wholly , exclusively and necessarily  for the employee’s work.

HMRC will accept that the conditions for the wholly, exclusively and necessarily test are met if:

• The employee performs substantive duties at home. Substantive duties are the tasks that employees must carry out which form all or part of the central duties of their employment. 
• The duties require the use of appropriate facilities.  
• Such facilities are not available to the employee on the employer’s premises. (Or the nature of the job means that the employee lives so far away from the premises it is unreasonable to expect them to travel there on a daily basis.)
• At no time before or after the employment contract is drawn up is the employee able to choose between working at the employer’s premises or elsewhere.

HMRC provide a number of examples of how these conditions are applied in EIM32790 . HMRC emphasise in their online claim service that where an employee is able to choose to work from home, relief for additional costs is not available, so the element of choice, if there is one, is very important.

Temporary relaxation for 2022/23

The majority of concessions relating to covid ended on 5 April 2022. However, there remains for 2022/23 a time-limited easement to claim tax relief for expenses for the  full tax year, even if the individual was only required to work from home for part of that tax year. This is described in the example of 'Amber' on EIM32790 .

In practice, as there have been no national lockdowns to date during 2022/23, far fewer people will have been required to work from home, meaning fewer people will be able to take advantage of this easement. 

An employee who meets these conditions can claim relief for the following expenses. With the exception of insurance, there are very similar to the costs that can be reimbursed by their employer above:

• additional heating and lighting

An employee cannot claim relief for the following expenses:

Where, as is often the case, it is not practical to calculate the allowable extra costs, then a claim for £26 per month (£18 per month prior to 6 April 2020) for monthly paid employees or £6 a week (£4 per week prior to 6 April 2020) can be made without having to justify the figure. This does not cover the cost of business calls, for which an additional claim can be made based on actual costs, as confirmed in HMRC's manuals at  EIM32815 .

Where the employee works from home some, but not all of the time - for example they work at home three days a week and in the office two days a week - they can still claim the full £6 a week deduction. There is no need to scale it back just because the employee is not working at home on a full time basis.

Where the employer pays some contribution towards homeworking expenses, but not the full £6 a week or £26 a month, then the employee can seek tax relief for the difference.

How to make claims:

An employee can make a claim:

• Or, if they are registered for self-assessment, through their tax return.

Full details on the different claim routes are available from  GOV.UK  and HMRC has an  interactive questionnaire  to help guide employees to the most appropriate method for their circumstances.

Provision of Home Office Equipment

It is generally accepted that working solely on a laptop for long periods is poor practice, and can lead to discomfort and back pain. Many homeworkers will need additional equipment including monitors, keyboards and even desks and chairs in order to make a functional office space. Employers and employees need to be aware though, that the tax position is significantly affected depending on how it is paid for. While a welcome concession was applied for 2020/21 and 2021/22 to allow employees to purchase and employers to reimburse costs, this has now ended.

Employer purchase

Where the employer has purchased and provided any necessary equipment then, provided there is no significant private use, no taxable benefit in kind arises on the employee.

If there is significant private use, then a benefit in kind will arise and so employers may wish to ensure that their employment policies make clear that significant private use is not permitted.

When or if the employee returns to the workplace and ceases to use the asset at home, some consideration will need to be given to what happens to the employer's property. If the property is returned to the employer, there will be no tax consequences. But if the employee keeps the asset and ownership of the asset is transferred from the employer to the employee then a benefit in kind could arise based on the market value of the asset at the time. If the employer does not wish the employee to suffer a tax charge, one option might be to include the asset transferred on a PAYE Settlement Agreement which would mean the employer would cover the tax costs of transfer. 

Employee purchase and employer reimburses

Where an employee purchases their own equipment personally and the employer reimburses them, this can cause tax issues as the reimbursement will be viewed as taxable income, subject to income tax and national insurance. Unless the concession for 2020/21 and 2021/22 (see below) applies, this should generally be avoided.

Employee purchases but employer does not reimburse

Where an employer is unwilling to reimburse the cost of equipment or office furniture, then employees can only claim tax relief their costs if they are able to satisfy the conditions to claim capital allowances. This requires the employee to demonstrate that the equipment is used in the performance of their duties.

While this may be straightforward for laptops and computers, under current HMRC guidance , employees are likely to struggle to obtain relief under capital allowances for office furniture. This is because office furniture such as desks and chairs put the employee in a (more comfortable) position to do their duties. HMRC does not consider these items are used in the actual duties themselves in the way that a laptop or printer would be.

Accordingly, tax relief from HMRC is unlikely for the costs of office furniture and in the first instance employees should see if this is something their employer is willing to purchase.

Claims for office furniture cannot be made through HMRC’s online microservice.

Temporary easements for 2020/21 to 2021/22 

During 2020/21 and 2021/22, temporary easements made it much easier for employees working at home for some or all of both years to receive tax relief. For reference purposes we have kept the details below of how these relaxations evolved over time.

Temporary relaxation for 2020/21 

On 27 March 2020, the Financial Secretary to the Treasury suggested in a  written parliamentary answer  that HMRC might take a more lenient view on tax relief for homeworking expenses during the pandemic for those employees who did not meet the strict definition of home as workplace and whose employers would not make any contribution to their costs.

In October 2020, further clarification from HMRC was supplied to the ATT and other professional bodies to confirm that relief would be available for individuals who were working at home on a regular basis for all or part of their time as a result of coronavirus. This relaxation to the usual tests was stated to apply for 2020/21 as long as the employee was not working at home by choice.

HMRC emphasised to us at the time that it was not possible for employees to simply decide to work from home in light of the Government's advice. It was necessary for there to be some form of discussion with the employer and, if the employer decided that the employee should work from home for a period, the deduction would be available.

This requirement that the employee must not have chosen to work at home caused some confusion at the time. Our understanding was that, although HMRC's position generally remained that when working from home is purely a choice an individual cannot claim, they would be more lenient regarding claims for 2020/21 to prevent multiple claims/contact from employees during the year as their position regarding homeworking changed as the country went in and out of lockdowns and restrictions.

In practice, most people who were able to work from home were highly likely to be mandated to work from home as a result of Government guidance at some point during 2020/21. Therefore, HMRC's position was that as long as an individual had been required to work from home  at some point in 2020/21 , they would accept a claim for homeworking relief for the whole tax year (provided it was made within the usual deadlines).

This meant that if an individual started working from home because their employer required them to, but then returned to their workplace for a period, this would not restrict the relief they could claim during 2020/21. HMRC confirmed to us that they would apply tax relief for the whole of this tax year, even if the taxpayer went back to their workplace before 6 April 2021. HMRC also confirmed that relief would not be restricted where the individual was only working at home on a part time basis.

In a meeting with professional bodies during 2020, HMRC indicated that the following examples would all be eligible to claim relief in 2020/21 provided working from home had been  mandated at some point in the tax year :

•  An employee is asked to work at home, but required to attend the office on certain occasions where this is business critical.
•  An employee is asked/required to work at home as the default position, but could attend the office at their discretion if it was easier to complete a particular piece of work, or for personal wellbeing reasons.
•  An employer strongly encouraged, but strictly did not require, homeworking and employees were free to attend their usual workplace at any time subject only, say, to pre-booking one of a limited number of workspaces available on a 'first come, first served' basis in order to ensure social distancing
• An employee could only choose to come into the office for, say, three out of five working days per week, or if limited availability of working spaces means they would not necessarily be able to work in the office at a time of their choosing.

If there was never  any  mandated working from home, then an employee would not be eligible.

HMRC launched an online claims microservice on 1 October 2020 which was set up to give the full amount of homeworking allowance for the 2020/21 year automatically. This was intentional to prevent multiple claims and amendments - HMRC were not asking anyone to say when they would return to the office or choose to work from home (as opposed to being required to).

A few individuals who claimed prior to the launch of the microservice and didn't claim relief for the full year - or who claimed over the £6 limit and/or included an additional expense – may not have received a full year’s worth of relief in 2020/21 as a result of lack of clarity over the position until that point. These people should contact HMRC if they want to increase their claim.

Temporary relaxation for 2021/22

Our original understanding was that the temporary relaxation which applied to 2020/21 would not apply to 2021/22. However, on 6 April 2021, it was reported by  Martin Lewis of Money Saving Expert  that the homeworking allowance would be available on the same terms for 2021/22 as it was for 2020/21- i.e. that as long as the individual had been required to work at home for some period during 2021/22 they would be able to claim through HMRC's microsite for the whole 2021/22 year.

We sought specific confirmation from HMRC regarding the position for 2021/22 and asked them to confirm that any homeworking for any period in that year which is not undertaken by choice would enable the individual to make a claim for the whole period and received the following additional information from HMRC's Press Office. 

"We recognise that ongoing lockdown restrictions mean that many employees are still required to work from home for some or all of the time. Therefore, we're accepting claims for the full year's expenses for the 20/21 and 21/22 tax years for employees who are eligible. This includes customers claiming through self-assessment.  To be eligible for tax relief you must carry out work which form all or part of the central duties of your employment and in doing so, you must have additional costs, such as heating, metered water bills or business calls, that are incurred as a direct result of working from home. They don’t include costs that would stay the same whether you worked at home or in an office.”

On 30 June 2021, HMRC issued a  press release  confirming that even if the employee was only told by their employer to work from home for a single day, they would be eligible for the full year's entitlement.  

Claims for the homeworking allowance for 2021/22 could also be made through the online micro-service.

Impact on PAYE codes 

For those in PAYE, HMRC have advised us that claims for homeworking allowances were not rolled forward into 2022/23 and any one working at home during 2022/23 and who wants to claim tax relief will need to confirm that they meet all the conditions set out above before submitting a new claim for 2022/23.  

Temporary easements for home office equipment - 2020/21 and 2021/22

As a temporary concession, the Government introduced  legislation  on 11 June 2020 to allow employers to reimburse employee equipment purchases without tax consequences.  Initially applying only until 5 April 2021, this was subsequently extended to 5 April 2022. HMRC were also able to use discretionary powers to treat the exemption as applying from 16 March 2020, when the first work from home directions were issued.

As a result, any reimbursement by an employer for the cost of equipment was exempt from income tax and national insurance between 16 March 2020 and 5 April 2022 as long as it:

• was provided for the sole purpose of enabling homeworking as a result of coronavirus, and
• would have been tax exempt if provided directly by the employer.

Furthermore, any private use of the reimbursed equipment was not significant.

As this exemption was laid under powers provided for by section 210 of ITEPA 2003 (power to exempt minor benefits) - and equivalent sections for NICs - any exemption was conditional on the benefit being made available to  all  an employer's employees on generally similar terms. Therefore, employers should have ensured that similar reimbursement terms applied to all employees that needed to work from home. It was not, for example, acceptable for directors to reimburse themselves for office equipment but not other staff.

If the employee returns to the office at some point and retains the equipment they were reimbursed for, no benefit in kind arises at that point as there is no transfer of ownership. The property has been that of the employee throughout.

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What tax relief is available to employees working from home?

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Any business operating remote or hybrid working should consider the potential tax relief and exemptions available to employees working from home.

Employers can make tax-free payments to directly reimburse homeworkers for certain household expenses. employees working from home may also be entitled to claim a deduction against taxable income for some of their household expenses and travel costs., can we make tax free payments to reimburse homeworkers for their household expenses.

Payments made to reimburse an employee's reasonable additional household expenses incurred while working at home can be made tax-free - provided that the employee works at home regularly and you have agreed that they can do so.

HMRC will approve a tax and NI free payment of up to £6 a week to an employee working at home (£26 a month for monthly paid employees) without supporting evidence of the cost. It's not necessary to pro-rate it for anyone only working at home part-time.

You can reimburse a greater weekly amount tax free provided there is supporting evidence to show that the payment is wholly in respect of 'reasonable additional household expenses' . This could include any additional heating and lighting costs; metered cost of increased water use; business phone calls; internet access; home contents insurance; and business rates (if applicable). Costs that would be the same whether or not the employee works at home are not covered. A broadband connection fee can only be reimbursed tax-free where the employee does not already pay for a broadband internet connection at home and needs one to work remotely.

Can homeworkers claim tax relief on household expenses?

Not all employers reimburse the costs of homeworking, however, there is an opportunity for homeworkers to claim tax relief themselves.

Employees can claim tax relief on household expenses if they can demonstrate that they were incurred 'wholly, exclusively and necessarily ' in the performance of their duties. This can be a difficult test to meet, particularly as HMRC does not usually allow claims where the employee has at any time had a choice of whether to work from home or not. However, for tax years 2020/21, 2021/22 and 2022/23 a deduction from taxable earnings is allowed for household expenses for the full tax year even if the employee was only required to work from home for part of the tax year (either by their employer or due to government advice on COVID-19).

Deductions can be claimed for additional heating and lighting costs; any metered cost of water used in the performance of duties; and the costs of business telephone calls and business internet connection. Relief can't be claimed for insurance costs.

In October 2020 HMRC launched an online portal giving employees the opportunity to make the claim for tax relief more easily. Employees who satisfy the conditions for relief are entitled to a deduction of £6 per week/£26 per month. Anyone wanting to deduct more than this will be expected to keep records and be able to show how their figure has been calculated.

Employees will get tax relief based on the rate at which they pay tax. For example, if they pay 20% basic rate of tax and claim tax relief on £6 a week, they will get £1.20 per week in tax relief.

If an employee works from home can they claim tax relief on travel expenses for trips to the office?

This will depend on whether the employee works from home full-time or part-time; and how regular their trips into the office are.

The HMRC rules on this are complex and centre on the definitions of 'permanent workplace' and 'temporary workplace':

• A permanent workplace is somewhere the employee attends regularly for the performance of their duties. Attendance is regular if it is frequent or follows a pattern, so that fortnightly travel, for example, is capable of being regarded as regular.
• A temporary workplace is somewhere the employee goes only to perform a task of limited duration or for a temporary purpose. Where an employee has spent, or is likely to spend, 40% or more of their working time at a particular workplace over a period of more than 24 months, HMRC will treat it as a permanent workplace rather than a temporary workplace.

If an employee works from home full-time, they can get tax relief on the unreimbursed travel costs of travelling to the office - provided that the trip is not undertaken regularly and HMRC accepts that the office is a temporary workplace. They can also get relief on the costs of travelling to another temporary workplace such as a client's premises.

If an employee splits their working time between home and the office, then they will have two permanent workplaces and cannot claim tax relief on the costs of travelling between them (as it is treated as ordinary commuting). They will however be able to get relief on the costs of travelling to any temporary workplace.

The only time that tax relief can be claimed for the costs of travelling between home and another permanent workplace is if the location of the employee’s home is dictated by the requirements of the job. Even then, costs are only deductible for travel to the office on days the employee usually works from home.

Is there an income tax charge if we provide employees with equipment to use at home?

If you provide an employee with equipment to use at home in the course of their employment, such as a monitor, keyboard or chair, there is no income tax charge provided any private use is insignificant. The equipment remains your property and should subsequently be returned (if ownership is transferred to the employee, a taxable benefit will arise). This exemption is conditional on you making the benefit available to all employees on similar terms.

Is there a tax exemption if we reimburse employees for the cost of homeworking equipment?

If an employee purchases equipment to use at home in the course of their employment, and you reimburse the cost, generally this does not qualify for a tax exemption. The  temporary tax exemption  covering home office equipment purchased by employees and reimbursed by employers as a result of COVID-19 (which allowed employees to receive the full reimbursement free from income tax and NICs) only applied from 16 th March 2020 until 5 April 2022.

If you have any queries in relation to any of these issues, please contact a member of the Employment & Immigration team , or Karen Davidson (Corporate Tax & Incentives) . 

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Working from home tax relief claims may still be possible for 2022/23

Published: 18 Jan 2023 Update History

Two relaxations were introduced as a result of the COVID-19 pandemic lockdowns to allow millions of employees to claim tax relief for the costs of working from home during the 2020/21 and 2021/22 tax years. These were:

• the relaxation of the strict eligibility requirements; and
• allowing relief to be claimed for the full year, even if there was a full or partial return to working at the employer’s location during the tax year.

From the current tax year 2022/23 onwards, employees who are eligible can still make a claim for tax relief for working from home. The claim can be made in self assessment (SA) returns, online , or on a paper P87 form .

The amount that can be claimed is £6 per week (£26 per calendar month), or actual evidenced amounts incurred on electricity and gas relating to the work area and business phone calls, as a deduction against earnings in respect of the weeks worked from home. A claim for the full tax year is no longer automatic.

Another key difference from 6 April 2022 for employees in England and other parts of the UK that did not continue COVID-19 working from home restrictions into 2022/23, is that the very strict eligibility requirements of s336, Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) apply.

These tests are summarised in HMRC’s guidance, at: 

• Claim tax relief for your job expenses - working from home
• EIM32760: Other expenses: home: working from home
• EIM32815: Other expenses: home: household expenses

For example, employees are not eligible to claim a deduction if they have chosen to work at home. Also, even if the contract allows the employee to work from home for some, or all of the time, no deduction can be claimed if the employer has appropriate facilities to allow the employee to work at the employer’s premises. An exception to this is where the nature of the job requires the employee to live so far from the employer’s premises that it is unreasonable to expect them to travel to those premises on a daily basis.

If making a claim for actual expenditure, a deduction is not allowed if the amounts are not wholly incurred in the performance of the employment (eg, costs of broadband that is used privately as well as for the employment).

It is not too late for employees to make a claim for 2020/21 and 2021/22. SA returns that have been submitted can be amended within twelve months of the filing deadline. HMRC’s portal allows backdated claims for up to four years.

• agents cannot file claims online, but can submit a paper form;
• claims cannot be made by phone;
• employees in SA must claim via their SA tax returns, and
• a claim cannot be made where the allowance (or reimbursement of evidenced amounts incurred) is paid to the employee by their employer, which would be tax-free under s316A, ITEPA 2003 , see HMRC’s guidance Expenses & benefits: homeworking .

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Working from home: Homeworking rates and allowances

What tax-free allowances are there for working from home? What allowances can be paid to homeworking employees?

This is a freeview 'At a glance' guide to to homeworking rates and allowances.

At a glance

Fixed rates for homeworking are agreed by HMRC: these amounts can be paid by employers to their homeworking employees to reimburse them for the additional costs of things such as light and heat used when homeworking. 

Alternatively, employees may be able to claim actual costs of homeworking if wholly, exclusively and necessarily incurred or in job-related accommodation. See Working from home: employer/employee

These are the maximum amounts that may be paid by an employer, without requiring a receipt, or evidence of expenditure by the employee.

A claim form for use by employees and employers can be found here:  Working from home: claim form

If higher amounts are paid these need to be evidenced by receipts, and the employer must disclose amounts reimbursed on form P11D, unless they are approved under the  Exemption for paid and reimbursed expenses .

The COVID-19 Homeworking exemption to Income Tax and National Insurance Contributions (NICs) where the employer reimbursed home office equipment expenditure was extended until 5 April 2022 and ceased to apply thereafter.

HMRC provided guidance for employees who are homeworking due to the coronavirus crisis, see COVID-19: Working from home .

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Working From Home Allowance

Marc Taylor

• 19th Aug 2021

Did you know that as a UK employer you are entitled to pay your employees who work from home, fully or partially, (this includes working from home due to a COVID 19 related illness) a working from home allowance.

This working from home allowance can be paid to your employees as expenses free of tax and NI through your payroll.

What’s included in the allowance?

Homeworking expenses include:

• equipment, services or supplies you provide to employees who work from home (for example computers, office furniture, internet access, pens and paper)
• additional household expenses, such as gas or electricity charges, for employees who need to work from home.

Is there a limit to how much I can pay employees tax and NI free?

Yes, listed below are the current limits enforced by HMRC:

Weekly/monthly tax limits:

An employer can also choose to back date these allowances

Can employees still claim tax relief if the employer doesn’t pay this allowance?

Yes, in the instance employers do not pay a working from home allowance to cover the costs of rising utility bills employees can still gain tax relief on the HMRC weekly or monthly limit as long as they are working from home.

An employee can only receive the allowance or the tax relief not both.

How much tax relief can the employee claim?

An employee can claim either tax relief on the following:

• £6 a week or £26 per month from 6 April 2020 – (you will not need to keep evidence of your extra costs).
• the exact amount of extra costs you’ve incurred above the weekly amount - you’ll need evidence such as receipts, bills or contracts

Employees will receive tax relief based upon the rate at which they pay income tax.

For example, if the employee pay the 20% basic rate of tax and claim tax relief on £6 a week they would receive £1.20 per week in tax relief (20% of £6).

This will be given to the employee through a tax code notification change that will be sent directly to the employee’s payroll provider through their RTI download.

The employee will also receive a P800 tax code notice from HMRC which will explain how their new tax code has been calculated.

Please visit the below HMRC websites for more information on the working from home allowance:

• Working from Home Allowance
• Gaining tax relief working from home

Alternatively, please contact our payroll team for more information on payroll and benefits.

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Expenses and benefits: homeworking

What to report and pay.

If any of the homeworking expenses you cover are not exempt from tax , you may have to report the costs to HM Revenue and Customs ( HMRC ), and deduct or pay tax and National Insurance on them.

Equipment, services and supplies

If you provide these for both business and private use, you must:

• report it on form P11D
• pay Class 1A National Insurance on the value of the benefit

If you let your employee keep equipment you provided during coronavirus (COVID-19) you need to record it as an employee benefit. The charge will be on the market value of the equipment at the time you agreed the employee could keep it minus any amount the employee paid towards it.

Additional household expenses

If you cover any costs over the weekly limit (£6, or £26 a month for employees paid monthly), you need to be able to prove that the payments are no more than your employee’s additional household expenses.

If the payments you make are more than your employee’s additional household expenses they count as earnings, so you’ll need to:

• work out the excess and add this to your employee’s other earnings
• deduct and pay PAYE tax and Class 1 National Insurance through payroll

Expenses related to COVID-19

You can report any expenses or benefits related to COVID-19 on your PAYE Settlement Agreement .

If you are providing any non-cash benefits (‘benefits in kind’) through payroll you can continue to report expenses and benefits in this way. You can also continue to report expenses and benefits through a P11D form .

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Money blog: Zoopla issues warning to sellers about overpricing homes

The Money blog is a hub for personal finance and consumer news and tips. Today's posts include a word of caution to house-sellers and hotels cancelling bookings on Oasis concert nights. Listen to a Daily podcast episode on the winter fuel allowance as you scroll.

Wednesday 28 August 2024 21:19, UK

• Hotel accused of cancelling bookings on Oasis concert nights - and relisting for higher price
• Capital gains tax rise on way, leading tax firm warns
• Zoopla issues warning to sellers about overpricing homes
• 'Good news for passengers' from Ryanair on fares

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• Top chef shares cheap soup recipe - as he picks best budget eats in Kent
• Has the Nike trainer bubble burst?
• Young people doing 'big no-no' with holiday money - here are the golden rules

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It's taking sellers over twice as long on average to sell their homes when they have to reduce the price than when there's no reduction, according to Zoopla.

The property portal said its latest research shows sellers should be realistic when it comes to pricing up their property if they're serious about moving.

According to Zoopla, it takes 28 days on average to agree a sale where the asking price hasn't been slashed.

But for sellers who've had to lower the price by 5% or more, the typical time to sell goes up to a whopping 73 days.

Around a fifth of homes put up for sale this month had their price cut by 5% or more, Zoopla said.

Executive director Richard Donnell said a rise in the supply of homes meant buyers had greater choice and prices would be kept in check.

But with mortgage rates still high, "buyers have less purchasing power than two to three years ago and remain price sensitive, meaning sellers can't afford to get ahead of themselves on where to set the right price for their home", he said.

Around 10 million people in England and Wales will not receive winter fuel payments this winter.  

Under Chancellor Rachel Reeves' plan, only those who receive pension credit or other means-tested benefits will still get the £200-£300 towards the cost of their energy bills.   

Critics, including Labour MPs, have said the payments will put even more pressure on elderly people as the cap on energy prices rises again in October.   

On today's episode of the Daily podcast, host Liz Bates gets a breakdown of Labour's plan from our political correspondent Serena Barker-Singh and hears from one of its critics, Labour back-bencher Rachael Maskell.   

Plus, could there be an alternative that could keep everyone happy? We hear from the Social Market Foundation's Sam Robinson about its proposal for an alternative to the winter fuel allowance. 

Listen by pressing play at the top of this page - and  tap here to follow the Daily podcast - 20 minutes on the biggest stories every day .

Prezzo restaurants will undergo a major revamp in the next few years after dozens of its sites were closed in a restructuring programme.

The high street restaurant chain announced the closure of 46 loss-making restaurants - more than a third of its sites - last year after it struggled with soaring energy and food costs.

The move put hundreds of workers at risk of redundancy.

Earlier this year, Prezzo bosses said the company had returned to profitability after the business restructure.

It is now planning to invest in restaurant refurbishments across the rest of this year, and in 2025 and 2026.

Chief executive Dean Challenger has said the outlook for the restaurant group is "positive".

The water industry has warned that firms will be unable to deliver reforms such as stopping sewage outflows without even greater bill rises, with crisis-hit Thames seeking more cash from customers than it originally proposed.

Britain's biggest supplier had initially sought a 44% rise to bills across the five-year period but is now proposing a 52% increase by 2030.

That could rise to a 59% hike, taking the average annual bill to £696, if it is given extra spending allowances by the regulator.

Ofwat has proposed water  bills can only rise an average 21% .

Now, a letter from industry trade association Water UK to Ofwat, seen by Sky News, has set the bodies on a collision course.

Read our full story here ...

More employers are offering sabbaticals as a way to boost employee wellbeing and improve staff retention, according to experts.

A new poll shared with The Guardian by the Chartered Management Institute (CMI) reveals that more than half (53%) of managers said their firm offered sabbatical leave, compared with 29% who said they did not. 

In the public or charity sector, the leave was more likely to be available (62% of managers said it was offered) compared with the private sector (44%).

Some 80% of younger managers under 55 said sabbatical leave was important for employers to offer, compared with 72% of people over this age.

Sabbaticals offer benefits to employees and employers alike, said CMI director of policy Anthony Painter.

He said companies were "doubling their efforts to boost staff retention" in a "competitive job market".

Taxpayers should prepare for Labour to hike the rate of capital gains tax (CGT) in its autumn budget, a leading tax firm has said.

Blick Rothenberg chief executive Nimesh Shah said Sir Keir Starmer has "clearly signposted" that the budget will be "painful" for higher earners and wealthier taxpayers.

The bleak picture painted by the prime minister in a news conference yesterday came after chancellor Rachel Reeves accused the previous government of leaving a £22bn "black hole" in the nation's finances. 

"One obvious option to [fix] this without breaking Labour's election promises is by raising CGT," Mr Shah said.

"The prime minister and chancellor seem to be acting with urgency when it comes to tax changes, so taxpayers will need to prepare now for a likely mid-year CGT rise."

The tax firm boss said the potential changes to capital gains tax - which is essentially a levy on any profit you make when you sell or "dispose of" an asset - could "encourage individuals to leave the UK and become a non-UK tax resident".

"Currently CGT raises less than 2% of the total tax take – it raised £14.5bn in 2022-23, and this is £2.5bn down from the previous tax year. 

"To improve that tax take the chancellor could potentially increase the rate of CGT to 25%-30%, and apply a lower rate, of say 20%, for sales of business assets to support entrepreneurial growth."

A hotel chain in Manchester has been accused of cancelling bookings from customers on nights Oasis is planning to play in the city in 2025 - and relisting them for a higher price.

Sacha Lord, night time economy adviser for Greater Manchester, wrote on X last night that he'd been contacted by "several people" who were told their rooms had been cancelled by Maldron Hotels after a "computer error".

He claimed they were later "back up for three times the price".

Several users have replied saying they have been affected by the issue.

Oasis fan Mark Slinger, 36, who lives on the Isle of Man, told Sky News he booked a room at Maldron Hotels in Manchester city centre for 20 July - the final night of Oasis's run of shows at Heaton Park.

He made the £90 reservation through booking.com yesterday morning when the band announced their major reunion tour.

However, he was contacted by the hotel that evening asking him to cancel the booking.

The email says: "We are writing to inform you of an issue with your booking at Maldron Hotel Manchester City Centre. Due to a technical error, you have received a confirmation for a booking that was not successfully made. Unfortunately we are unable to accommodate your booking at this time."

It said a cancellation request had been sent, which Mark was asked to "accept promptly".

He told Sky News he hasn't accepted the request and "won't be doing". He also doesn't believe the issue was down to a "technical error".

"They realised they can cancel and re-sell at four times the price due to the Oasis gig," he said.

Maldron Hotels said in a statement to the Money blog that a technical error on Monday and Tuesday led to "substantially more" rooms being booked at its two Manchester hotels than were available for the nights of the four Oasis concerts.

It said it would be unable to honour bookings made on these dates as a result, and no bookings are currently being taken while the issue is investigated.

"This is not an attempt to resell rooms at inflated prices, rather an overbooking issue due to a technical error with our booking systems," the hotel said.

"Additionally, due to the same technical error, a small number of customers were able to book the rooms at a higher price later that evening. We will also be unable to accommodate these bookings.

"We will be honouring all bookings made prior to 26 August. 

"We sincerely apologise for any inconvenience caused."

Hotels operate dynamic pricing so that rates go up along with demand - so it's not unusual for prices to increase substantially around big events.

Yesterday, we reported that hotel prices for Oasis's first night at Wembley were already as much as three times as expensive as the week before.

"I had a quick look at a Holiday Inn a couple of miles away the week before the concert, it's £195 a night. The first night of the concert, it's £594 a night," said correspondent Matthew Thompson.

"So already people are getting on the hotel rooms even before the tickets go on sale. That gives you some sense of just how much demand there is for these tickets."

Have you been affected by this issue? Let us know via WhatsApp .

Some of the country's biggest energy companies are attending talks with the government today about how they can help struggling customers with their fuel bills this winter.

Centrica, EDF and Scottish Power are among those taking part in discussions with minister Miatta Fahnbulleh at the energy department, as are regulator Ofgem, Energy UK and Citizens Advice.

Our  political correspondent Darren McCaffrey  says it's part of a government attempt to have energy firms do more to help customers.

"What the government is saying is there isn't as much help as there has been previously, fiscally we're in a pretty desperate situation - they're looking for the companies to step up," he says.

There are three things in the government's mind:

• The energy price cap will increase by 10% from 1 October
• Household energy debts are said to be at record levels
• Most pensioners are losing their winter fuel allowance

Whether energy companies will be willing to pick up the tab to help is uncertain right now, though.

"The government is trying to push them in that direction," says Darren. 

"That's the key thing that will potentially emerge from this meeting."

By Sarah Taaffe-Maguire , business reporter

It's another good morning for anyone travelling to the US as the pound has remained near a more-than two-year high against the dollar. 

A pound still buys $1.32, meaning sterling goes further than at any point in the last 29 months. 

Market observers expect the US central bank to sizably cut interest rates, which is weakening the value of the dollar. 

As oil is paid for in dollars, having the currency weakened can make importing motor fuels cheaper. This morning, the benchmark oil price has fallen below $80 a barrel, standing at $78.79, the lowest since Friday last week.  

The share prices of the biggest companies on the London Stock Exchange are down 0.02% for the 100 most valuable (the FTSE 100) and 0.06% for the 101st to 350th most valuable (the more UK-based companies of the FTSE 250).

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