Claiming tax back on home working expenses
Many employees have been asked to work from home in recent weeks. This seems to have resulted in some confusion about what expenses you can claim tax relief on. If you are claiming tax back from HMRC, make sure you get your claim right.
So, let’s say your employer has asked you to work from home during the coronavirus pandemic. As a result, your employer might have agreed to cover the cost of some things, or it might be that your employer isn’t paying you anything extra, yet you are incurring some extra costs. This article covers the latter – that is, it assumes that you are incurring extra costs that are not being reimbursed by your employer.
Will HMRC agree that I can claim tax relief on some home working expenses?
It is important to note that tax relief for employees’ unreimbursed work-related expenses can only be claimed if you are ‘required’ to work from home. Normally this means that your contract states that home is your workplace or if you have to work from home because your employer does not have available office space. See our guidance here for more information.
However, it appears from a government list of rules that have been relaxed to help support business, that HMRC have confirmed they will accept the coronavirus situation as one where you are 'required' to work from home.
So it seems that, in principle, HMRC will accept claims for tax relief on the basis you are a home worker for the duration of the pandemic.
My employer isn’t paying my home-working expenses: what can I claim tax relief for, and how?
You can claim tax relief on the cost of working from home – for example, extra gas, electricity, telephone and internet subscriptions (if you do not have them set up already) and metered water bills. However, as keeping records of your actual household running costs can be difficult, HMRC will instead allow a flat rate expense claim of up to £6 a week (note this was £4 per week from 6 April 2012 to 5 April 2020). Our guidance explains more.
Claims for tax relief are made to HMRC using form P87. Note that if you wish to claim for both 2019/20 and 2020/21 tax years, you will need to submit two forms – one for each year.
Can I get tax relief on office equipment, like a desk, chair or extra monitor?
We have seen suggestions that you can claim tax relief from HMRC using form P87 if you buy home office equipment to use while you are working from home, such as an extra computer screen or a desk and office chair. This is not correct – HMRC will not allow tax relief for these items via an expense claim and, as far as we are aware, no relaxation to their position on this has been published.
⚠️ Please note that although there has been a recent announcement about an exemption for home office expenses, this would currently only seem to apply where they are reimbursed by an employer. This does not mean that you can now claim tax relief via the P87 process for any such costs that you have incurred yourself and not had reimbursed.
Why? You might ask. The reason is that expenses you incur in connection with your job have to meet a test to qualify for tax relief. This test is that the expense is incurred ‘wholly, exclusively and necessarily in the performance of your duties’.
The words in bold above (‘in the performance of your duties’) stop you from getting tax relief for buying a desk or chair, for example. You may have bought these items to put you in a position to do your job, or – quite literally – a better or more comfortable position to do your job. This is the subtle but important difference – whether the purchased item enables you to do your job, rather than the expense being incurred while doing your job.
Things like printer cartridges and paper are different, as these are items you use while doing the job itself. For example, your work might involve writing a letter that you need to print out and post. The cost of the ink, the paper, the envelope and the stamp are all necessarily incurred by you in doing the job. These items would normally be reimbursed by your employer, but if there were not, you could make a claim for tax relief. They would be allowed in addition to the flat rate for household costs we talked about above.
What about the cost of phone calls, including mobile calls?
If you are using your home phone or personal mobile to make calls for work, then the unit cost of calls can be claimed, but only to the extent they aren’t covered by free minutes you may be given with your package. This is on top of the £6 per week flat rate amount for household costs. HMRC's guidance on how to work out how much cost to allocate to calls made outside of a package can be found in their Employment Income Manual.
How much tax relief will I get?
HMRC will give you relief from income tax on any allowable expenses. You do not get the expense itself repaid to you.
So, let’s say you spend £100 on expenses that you can claim. A basic rate taxpayer would get 20% of that back from HMRC in income tax relief – that is, £20. You do not get any relief from National Insurance Contributions (NIC) either for such expense claims.
How will the tax relief be given?
If you are claiming for expenses that you incurred before the tax year end (5 April 2020), you should get a tax refund from HMRC by cheque, when they have processed the claim.
For expenses you are incurring now, you can wait until the end of the year (5 April 2021) to get a cheque. Instead, you can ask HMRC to adjust your 2020/21 PAYE tax code to give you the tax relief now. This is easiest for them to do for flat rate allowable homeworking expenses as they won’t go up and down. But you need to keep an eye on your code if things change. For example, if you claim the flat rate relief of £6 a week, HMRC might adjust your tax code assuming you will be eligible for relief for the whole tax year, so they will include £6 x 52, £312, in your 2020/21 code.
However, let’s say that your employer re-opens their offices from Monday 3 August 2020 and asks you to start going back in. Assuming you were working from home at 6 April, the start of the tax year, you would only be entitled to tax relief for 17 weeks of the tax year, that is on £6 x 17, £102.
At the time you stop working from home, you will need to contact HMRC at to ask them to adjust your tax code, reducing the amount of home working allowance. You can do this via your online Personal Tax Account, or telephone.
This article supplements our coronavirus guidance on work changes for employees. Further information to help employees (and employers) understand the tax implications when employees are working from home can also be found in this guide which has been produced by the CIOT.
Please see our coronavirus guidance section generally for more information that might be helpful to you in the present situation.
Contact: Kelly Sizer (click here to Contact Us)