Homeworking Costs: Explained!

More employees than ever before have been forced to work from home during the coronavirus crisis.

With this comes some tax implications for employees working from home.

In this blog, we’ll share with you everything you need to know about Homeworking Arrangements.

What Are Homeworking Arrangements?

When an employee works from home, they have additional costs that they wouldn’t normally accumulate if they worked in an office.

For example, the need to keep their house warm and turn the heating on, or the need to have the lights on if it’s a bit of a dreary day.

These things all incur extra costs for the employee who is working from home. These are costs that they wouldn’t naturally incur if they were working in an office.

Not all Homeworking costs are covered though. These are called ‘fixed costs’ – for example, the internet and their phone line.

Working from home does not increase these ‘fixed cost’ bills, because the employee would normally pay for it anyway. Working from home has not increased the financial obligation to these payments.

The general rule is this: if a cost has increased due to working from home, then there are some tax effects that come with this.

What Are The Rules For Payments?

Of course, coronavirus has meant that many employees are in this situation right now.

As an employer, you will be able to make payments to your employees in order to cover these costs. These payments are tax-free receipts.

The payments must be ‘reasonable’ and apply when Homeworking is part of an arrangement where the employee regularly works from home.

HMRC say that these ‘reasonable’ payments should be £312 a year at most. This is equivalent to £6 a week during this coronavirus crisis. 

If the payments don’t exceed this amount, then the employer can make the payments and won’t have to keep any records.

However if the payments do exceeds this ‘reasonable’ figure set by HMRC, then the employer should keep records.

What If An Employer Doesn’t Offer Homeworking Costs?

If an employee is not offered the Homeworking costs by their employer – then they can deduct the costs under a different method via HMRC instead.

Getting this support can be tough. They must meet these criteria:

  1. The work from home must be integral to the workers role & duties. This is usually determined by the tasks earning revenue.
  2. Their duties require a surrounding that is provided within the home.
  3. The work cannot be done at the office/ employers premises, or it is unreasonable to ask them to travel a long distance everyday. This would be particularly applicable given the COVID measures.
  4. There was no choice at the time of employment to choose where they worked.

Usually an employee will need all four of these in place to get the Homeworking costs deducted themselves. Simply choosing to work from home will not count.

Again, in this situation, the employee can only deduct for additional costs such as lights and heating, rather than fixed costs (as mentioned earlier). The employee will be required to keep track of these.

Remember these costs must be exclusively necessary to the employees’ work duties at home.


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