Tax relief on working from home

There is still time to claim tax relief on working from home expenses. You may be eligible if you have to work from home on a regular basis, either for all or part of the week for 2020-21 and 2021-22 tax year. 

Employees on PAYE scheme

If you are registered on a Pay As You Earn (PAYE) scheme with your employer and ordinarily do not have your expenses reimbursed, you can make a claim for working from home expenses by following the link to HMRC: https://www.gov.uk/tax-relief-for-employees/working-at-home

As per the scheme, employees can claim tax relief on £6 a week and don’t need to provide any evidence of the costs. The amount of tax relief you will receive will depend on your income tax bracket. So, if you pay 20% basic rate tax, you will get £1.20 tax relief per week (£6 x 20%).

Should your working from home expenses be more than £6 per week, you will need to let HMRC know the exact amount of extra costs incurred above the £6 rate. You will need to provide evidence of such costs such as bills or receipts.

Directors of a limited company

If you are a director of a limited company, there are two options of claiming working from home costs through your company. The company will also get a corporation tax relief on these costs.

1. Similarly to PAYE scheme, you can claim £6 per week cost through the company as the standard HMRC’s approved rate without a requirement to provide the evidence of the costs

2. Alternatively, you can calculate the costs of working from home such as gas, electricity, water and broadband based on a number of qualifying rooms you have in your house.

The second option requires more detail, and the calculation must be reasonable and justifiable to HMRC as it can be open to enquiry. Please also note that with this option, you do not want to dedicate an entire room for business use otherwise, there will be capital gains tax on that room if you sell your home. 

Finally, if you choose to work from home (either through the PAYE or a limited company), then you cannot claim tax relief on working from home expenses.

Please contact our Small Business Department for assistance and guidance.