The working from home allowance

The working from home allowance 150 150 Purple Lime

Over the last few decades the idea of working from home went from unthinkable to fairly commonplace. But it was still preferable to most businesses for their employees to work from offices, rather than their own homes. However, with Covid-19 forcing people to stay at home unless they are key workers, working from home is now essential, not just a luxury. And after all of the initial teething problems, many businesses have actually said they plan to keep working from home as a policy (or at the very least an option) for their employees, even after Covid-19 has run its course.

For businesses this means a reduction in costs for things like premises and furniture, and for employees it means they actually end up spending a bit more – on the extra power for home computers, heating they might not normally run during the day, or even home office equipment to make working from home possible. Luckily, employees can recoup some of that cost, using the Working from Home Allowance.

What Is The Working From Home Allowance?

In it’s simplest form, the Working From Home Allowance is a form of tax relief, designed to cover any additional household costs you incur if you work from home on a regular basis – either full time, or just for part of the week. According to the Government guidance, additional costs you can claim relief for include:

  • Heating
  • Metered water bills
  • Metered electricity bills
  • Home contents insurance
  • Business calls
  • A new broadband connection
  • Equipment (like laptops, chairs or mobile phones) used for business

The allowance doesn’t cover things that would be the same whether you were working from home or from an office, so you can’t claim relief for things like mortgage interest, rent or council tax and you can’t claim if you choose to work from home (though Covid-19 has changed this somewhat). You claim by filling in the right areas on your self-assessment tax return – though your employer may choose to process this differently if you are working from home due to Covid-19.

How to Claim

In general, there are two ways you can claim the Working From Home Allowance. You can claim tax relief on:

  • £6 a week from April 6th 2020 (for previous tax years the rate is £4 a week).
  • The exact amount of extra cost you’ve incurred above the weekly amount. You will need to provide evidence – like receipts, bills or contracts, to prove this.

By doing this you’ll get tax relief based on the rate at which you pay tax. For example, if you pay the 20% basic rate of tax, and then claim tax relief on £6 a week, you would get £1.20 a week in tax relief. If you find this hard to get your head around, don’t worry, you’re not alone. Have a chat with a small business accountant, who will be able to guide you through the process, and potentially even fill in your tax return for you. They will also be able to help you understand how you should claim, and if there is anything else you can claim for in your unique situation.

Working From Home During Covid-19

Of course Covid-19 has changed a lot of things, and one of those is the sheer number of people now working from home. With the Government advising people to stay home if they can, over  60% of UK workers are currently working from home, and at least 26% plan to continue this when lockdown is over. This means many more people will be looking to claim for those extra expenses now and moving forward.

If you are working from home due to the pandemic, but would otherwise be in an office or other place of work, then you may be entitled to claim the Working from Home allowance for the time you’re at home. There are some pieces of equipment, services and supplies that you may be eligible to apply for relief on, including:

  • Mobile phones and SIM cards
  • Broadband
  • Laptops, tablets, computers and office supplies
  • Electricity, heating and broadband
  • Employer provided loans
  • Temporary accommodation
  • Vehicle use

Provided there is no significant private use of any of these, then you may be eligible to claim. It’s also important to know that if you are eligible for the Coronavirus Job Retention Scheme, you won’t be able to claim this relief. Again, a small business accountant will be able to help you work out what you can claim, and how to claim it using your PAYE Settlement Agreement.

This is uncharted territory for a lot of us, which is why there is so much guidance out there on what can be claimed, and by who. The Working From Home Allowance is designed to offer a level of relief for anyone who has incurred extra costs by working from home, even if they would not normally. At Purple Lime, we are always happy to provide support and guidance to business owners in handling work from home claims and allowances, and understanding what they and their employees may be eligible to claim for. If you would like to find out more, just get in touch by emailing us at hello@purplelime.uk.com or call us on 01249 691360