Other employment expenses
Tax relief on expenses for employed homeworkers
Payroll giving Other employment expenses
Special tools and clothing
HMRC have agreed fixed amount for workers in a range of industries for tools or any special or protective work clothes which are not paid for by the employer. You simply claim the amount shown on the list for your type of industry or profession. This is a relief which is often not claimed because it is not widely publicised. It applies to many lowly paid jobs such as nurses, agricultural workers, messengers, labourers. Do examine the full list which you can find here.
If you need to claim more than the set amounts you will have to agree this with HMRC.
Professional fees and subscriptions
These are allowable deductions if they are amounts you have to pay in order to carry on your profession e.g. doctors. HMRC also allow annual subscriptions to certain professional organisations approved by them. You can find the list here.
Loan interest
In certain circumstances you can claim a deduction for interest on a loan to buy equipment for your work (not cars or motorbikes) or shares in the business you work for. You will need to ask your tax office for more information if this applies to you.
Back to the top
Tax relief on expenses for employed homeworkers
The following information has been taken from an HMRC article on homeworking expenses. It has been edited for the purposes of the website.
Conditions for relief
You may be able to claim some tax relief for expenses that you incur and pay wholly, exclusively and necessarily in the performance of the duties of your employment when you work from home and such expenses are not repaid to you by your employer. In other words the expenses must be entirely and specifically connected with your employment.
For an expense to be allowable it must be one that you have to incur solely because you hold the employment, and not because of any reasons personal to you. So any element of personal choice as to whether you work at home or at your employer's premises will prevent a deduction for those employees who choose to work from home.
There are two tests normally applied:
- that the duties that the employee performs at home form a substantial part of the employment; and
- that there is a requirement that those duties should be carried out at the employee's home and nowhere else.
Homeworking expenses are different from travelling expenses because the precise place where an employee lives is, usually, a matter of personal choice.
It follows that the expenses of travelling to and from the employee's home are a direct consequence of that personal choice. However if you have a job the duties of which do require you to work away from the employer's premises the resulting expenses (ignoring travelling expenses) are likely to be much the same irrespective of where you happen to live.
As a result HMRC will accept that employees who work at home are entitled to a deduction for their additional household expenses where all the following circumstances apply:
- the duties that you perform at home are a substantial part of the duties of the employment. These are duties that you have to carry out and that represent all or part of the central duties of the employment,
- those duties cannot be performed without the use of appropriate facilities,
- no such appropriate facilities are available to you on the employer's premises (or the nature of the job requires you to live so far from the employer's premises that it is unreasonable to expect you to travel to those premises on a daily basis),
- at no time either before or after the contract is drawn up are you able to choose between working at the employer's premises or elsewhere.
If one or more of those conditions are not satisfied HMRC will argue that you are not entitled to relief for the expenses of working at home. You can appeal against any ruling if you consider you have a case to answer.
The expenses which qualify for relief
It is a condition for relief that the expenses must be incurred wholly and exclusively in the performance of your duties. In practice that means that relief can only be allowed for:
- the additional unit costs of gas and electricity consumed while a room is being used for work,
- the metered cost of water used in the performance of the duties(if any),
- the unit costs of business telephone calls (including dial up Internet access).
Expenses such as mortgage repayments or council tax do not qualify.
It may be difficult to work out exactly what costs are involved so HMRC will accept that employees who satisfy the conditions for relief are entitled to a deduction of £3 (exclusive of the cost of business telephone calls) for each week that they are required to work at home, without having to justify that figure.
If you want to deduct more than £3 per week you will be expected to keep records and to be able to show how each figure has been calculated.
If your employer repays any of your expenses or makes you a payment towards them you must deduct this from any claim. Have a look at example 11 and example 12 which look at the deduction for an employee's non-refunded homeworking expenses and the separate exemption for homeworking expenses repaid by the employer.
Examples (from HMRC article)
In all the following examples, and unless otherwise stated, it is assumed that: the duties that the employee performs at home are a substantial part of the duties of the employment, and those duties cannot be performed without the use of facilities at their home.
Back to the top
| Example 1 A lives in Glasgow and he works throughout Scotland for an employer whose nearest office is in Newcastle. A therefore carries out all his administrative work at home where he has set aside a room as an office. A is entitled to relief for the additional costs which he incurs as a result of working at home. The nature of his job requires him to live in Scotland, where no employer-provided office facilities are available. |
| Example 2 B works for the same company as A. He carries out similar work in the North East of England. The company would be happy for him to work from its offices in Newcastle, but they have agreed that B can work from his home in Durham, where he has set aside a room as an office. B is not entitled to a deduction for his homeworking expenses because he is working at home by choice. |
| Example 3 The company which employs A and B decides to close its regional offices and to operate solely from its head office in London. B is still based in the North East of England and he continues to work from his home in Durham. Following the closure of the Newcastle office he has no practical alternative but to provide himself with office facilities at his own expense. B is now entitled to relief for the additional costs which he incurs as a result of working at home. |
| Example 4 A is promoted. That is normally a head office job. However A is a fervent supporter of his local football team and rather than relocate to London he persuades the company to allow him to continue to work from home. A is no longer entitled to a deduction for his homeworking expenses because he is now working at home by choice. |
| Example 5 C works at his company's offices in Leeds. His home is in Kings Lynn and he spends the week in Leeds, travelling home at weekends. His employer then introduces a homeworking policy under which those employees who wish to do so can work from home. C accepts the offer and thereafter works from his home in Kings Lynn, where he sets aside a room for use as an office. He is not entitled to a deduction for homeworking expenses because he is working at home by choice. This example is based on a real case. |
| Example 6 D lives in Gloucester and applies for a job with a company whose offices are in Birmingham. The company are happy to pay his expenses of moving from Gloucester to somewhere on the outskirts of Birmingham. However D does not want to disrupt his childrens' schooling, or to commute between Gloucester and Birmingham, so he asks the company if he can work from home. The company agrees, and D's employment contract says that he will be home based. He sets aside a room for use as an office. D is not entitled to a deduction for homeworking expenses because he is working at home by choice. The term in his contract of employment requiring him to work at home is simply an expression of his personal choice. |
| Example 7 A company employs a team of sales people whose job is to follow up sales leads by telephone. The company trades from two small offices which house the director, her secretary and two clerical staff. There is no room for the sales team, who are recruited specifically on the basis that they will work from home. The members of the sales team are entitled to a deduction for the additional costs which they incur by working at home. |
| Example 8 The company in example 7 becomes so profitable that it is able to move to larger premises. New recruits to the sales team are required to work at the company's premises. Existing team members who live within daily commuting distance are invited to do so. Those who decide to continue to work from home are now doing so by choice, and are no longer entitled to a deduction for a proportion of their household costs. |
| Example 9 E is the UK sales representative of a Dutch company. The company does not have an office in the UK so E is recruited on the basis that he will work from home. He is entitled to a deduction for the additional costs that he incurs as a result of working at home. |
| Example 10 F is a teacher at a secondary school. During term time she regularly takes work such as marking exercises home to complete in the evenings and at weekends. However she has free periods during the school day and the school has rooms available where she can mark papers if she wishes to do so. F is not entitled to a deduction for the expenses of working at home because appropriate facilities are available on her employer's premises. She may feel that those facilities are inadequate, but that is not enough to satisfy the statutory test. It is not an objective requirement of her job that she should perform any of her duties at home. |
Example 11 An employer introduces a homeworking policy under which employees who wish to work from home may do so. The employer makes a payment of £3 per week towards the additional household expenses of those employees who decide to work from home. The £3 per week is exempt from tax under current tax law. However employees who can show that working from home costs them more than £3 per week are not able to obtain a deduction for the excess because they are working at home by choice. |
| Example 12 G is the North of England representative of a company whose only offices are in London. HMRC have agreed that he is entitled to a deduction for the expenses of working at home, and he produces evidence that his additional household expenses amount to £4 per week. However, his employer makes a contribution of £3 per week towards those expenses. That contribution is exempt from tax The amount G is able to deduct is therefore £1 per week, being the difference between his allowable, additional expenditure of £4 per week and his employer's repayment of £3 per week. |
Back to the top
Homeworking and broadband expenses
When people work at least partly from home for their employer - called a homeworking arrangement - frequently such work is carried out online, using a broadband connection. So it is important to understand when your employer can refund your broadband costs without there being any tax implications.
An employer can reimburse you tax free any reasonable additional household expenses which you pay out under a homeworking arrangement. The exemption only applies to payments the employer makes and you can not claim any unreimbursed expenses by deducting them from your income on your tax return.
So what exactly is a homeworking arrangement - it is a formal arrangement between employer and employee under which you regularlywork at home carrying out at least part of your job. These arrangements need not be in writing and need not involve all employees but it would not apply where you just work at home informally and not by arrangement with your employer.
The rules also say you must be incurring additional household expenses by having this arrangement (which include increased charges for internet access). These costs need to be reasonable and be incurred in connection with your job. You cannot however include any costs that would be the same whether or not you worked at home (e.g. council tax).
So far as internet costs are concerned, there is a difference between someone who already has broadband before entering into a homeworking arrangement and a person who subscribes for broadband when they start the homeworking arrangement.
The first situation cannot be treated as if you have any additional expenses because you are using an existing subscription and the cost would be the same whether or not you are working from home.
In the second case, you can be reimbursed a reasonable amount of the initial set-up costs (if any) and ongoing subscription.
If you work at home one day a week and use the internet privately for a lot of your time online shopping or downloading music etc. - you should not be reimbursed the full cost. If however you are based permanently at home and you make hardly any private use of the internet you could be reimbursed the full cost.
Here are some examples to help make this clearer:
| Jane didn't have a computer but then she started to work at home under a homeworking arrangement needing internet access and her employer provided her with one for her to use. Jane now subscribes for a broadband internet package, costing £25 a month. As a result of the homeworking arrangement she incurs an additional household expense. Jane's employer can reimburse the full £25 a month cost of the subscription without any tax or NIC implications. David has a broadband internet connection, which he originally had under his existing qualifying homeworking arrangement. David then moves job, and agrees a homeworking arrangement which needs broadband access with his new employer. It may be possible to treat the broadband costs as an additional household expense. Cara has an existing broadband internet connection used by all her family. She begins working at home under a homeworking arrangement and uses the existing broadband access in connection with her work. Unless Cara has had to change her broadband internet package (to allow for increased usage), there is no additional household expense. Any refund of her costs by her employer will be taxable as earnings. Jake has a broadband internet connection used by all his family. When he begins working at home under a homeworking arrangement with his employer, he takes out a second broadband internet subscription (ie, a second telephone line is broadband-enabled) for use in connection with his work. Jake has incurred an additional household expense as a result of the homeworking arrangement. His employer can make a tax-exempt reimbursement of the whole of the cost of the second subscription. |
If you pay tax through PAYE (Pay As You Earn), Payroll Giving is a way of making regular gifts to UK charities. It allows you to authorise your employer or company/personal pension payer to make the donation from your pay or pension.
The payments are made before your tax is worked out and deducted so you get relief on your donation immediately at your highest rate of tax.
For example - if you pay tax at the basic rate of 20%, and authorise a monthly donation of £10 - you save £2 tax (20% of £10). The actual cost of the donation to you is £8. If you pay tax at the higher rate of 40% and authorise a monthly donation of £10 - you save £4 (40% of £10). The actual cost of the donation to you is £6.
Payroll Giving does not affect any other donations you might want to make to charity. You can, for example, make other donations using Gift Aid if you wish.
You can use Payroll Giving as long as both of the following apply:
- you are an employee or you get a company/personal pension and your employer or pension payer deducts tax through the PAYE system
- your employer or pension payer operates a Payroll Giving scheme.
If your employer or pension payer does not operate a Payroll Giving scheme, they may be prepared to start one. They can find out about Payroll Giving schemes and contact details for Payroll Giving agencies on the HMRC website.
You can make a donation by authorising your employer or pension payer to deduct a set amount from your salary or pension income and then your employer or pension payer hands over your gift to a government approved Payroll Giving agency, which then passes the money on to your chosen charity.
You do not have to tell your employer or pension payer which charities you support. The Payroll Giving Agency will provide you with a charity nomination form which you can complete and return directly to the agency to tell them where they should send your donations.
Some Payroll Giving agencies can provide you with a charity card or cheque book so that you can make gifts directly to any charity whenever you want to.
Once a gift has been deducted from your pay or pension no refund is possible. Some agencies may charge a small fee, which is deducted from your donation, to cover administrative costs.
For more information have a look at the HMRC website.
Back to the top
