Employers can pay a tax-free allowance to employees of up to £6 per week or £26 per month to reimburse them for the additional costs of working from home, such as heating and lighting the workspace and business telephone calls. Most employers do not pay this because of the cost savings employees have by not travelling to their workplace. A deduction against income is not normally available if the allowance is not actually paid.
However, the Government have confirmed that for the period of the Covid-19 pandemic employees can now claim a deduction from earnings for this allowance where it is not actually paid by their employer. Alternatively, employees can claim relief on the actual costs incurred subject to being able to provide suitable evidence to support these additional costs.
HMRC has further confirmed that the £6 per week allowance is available in full, even if an employee splits their time between home and office (i.e. the allowance does not need to be pro-rated over the number of days spent each week at home and in the office).
Employees working from home can claim the deduction from their earnings on their annual Self-Assessment Tax Return or by using the HMRC Form P87. Alternatively, employees can check their eligibility here and the access their own government gateway account to claim tax relief in-year by adjusting their 2020/21 PAYE code number.
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