Following travel and social distancing restrictions, more of us have worked from home than ever before in recent months. Whilst restrictions are lifting, individuals that can work from home are still being advised to do so. If this includes you, a change to homeworking tax allowances could be beneficial.
Working from home full-time or having flexible working locations has been a gradual trend. In 2019, research from the Office of National Statistics suggested that three in ten UK employees had experienced working from home, an increase of 5% compared to the previous year. As businesses were forced to assess working practices as a result of the Covid-19 pandemic, it could accelerate the pace of change and mean far more of us work from home now and in the future.
Several companies have already revealed that they’ll be adopting working from home practices permanently. Social media platform Twitter is allowing staff to work from home “forever” if they choose to, and other firms have stated they’re exploring the option.
Working from home comes with plenty of benefits, we doubt many people new to working from home are missing the commute and it can save on some costs, such as travel and lunch expenses. However, as you’re spending more time at home, your household bills may start to creep up, such as electricity and heating costs.
The good news is that a tax-free allowance is available to help you cover these costs if you’re working from home on a regular basis.
The homeworking allowance
For the 2020/21 tax year, the flat-rate homeworking allowance increased from £4 to £6. It may not seem like a huge amount at first glance but the additional £312 a year can help you cover the expenses associated with homeworking.
How you claim and whether you need to keep evidence of expenses will depend on your employer.
Since 2011, all employers have been able to pay their employees this additional tax-free allowance when they work from home on a regular basis. Where employers take this step, you don’t have to provide any evidence of the additional expenses occurred due to a homeworking arrangement. However, if your employer pays an additional cost that exceeds the flat-rate, currently £6 per week, you will be required to demonstrate the extra expenses.
Previously, it was more complicated and provisions were stricter if your employer was unable or unwilling to pay the homeworking allowance. In addition to keeping records and evidence of expenses, employees have to meet four criteria in order for their home to be classed as a workplace:
- The duties that the employee performs are substantive duties of employment
- Those duties cannot be performed without the use of appropriate facilities
- No such appropriate facilities are available to the employee on the employer’s premises
- At no time either before or after the employment contract is drawn up is the employee able to choose between working at the employer’s premises or elsewhere.
These complexities meant that the allowance was little used when employers didn’t pay the homeworking allowance. However, for the new tax year, this has been relaxed. Employees that work from home and meet the requirements will now be able to claim a flat-rate deduction of £6 per week to help ease the burden of administration of HMRC. For years before 2020/21, HMRC will accept deduction at the previous rate of £4 per week.
Given the current restrictions around working and social distancing, the move is good news for those that could be working from home for the foreseeable future.
If you fall into the group of workers that will need to claim the homeworking allowance directly from HMRC, you can do so online, by phone or via post. Further details can be found here. If you’re claiming more than the £6 per week flat-rate allowance, you’ll need to have records and receipts to evidence this.