COVID-19: What expenses can I claim when working from home?

If you are employed

For employees these will of course vary according to the policies set by your employer, so you should check your contract or working from home policy.

Employers can reimburse their staff for reasonable and additional expenses incurred such as heat and light. This reimbursement is for increased expenses i.e. variable costs and will not cover expenses such as mortgage interest i.e. fixed costs.

There needs to be a work from home policy in place and the claim is for employees who have to work from home and not those who choose to.

With the current pandemic in place and most of the UK having to work from home due to the COVID-19 measures, HMRC have now confirmed that that the temporary arrangements throughout this period will qualify for the exempt payments (as below). It is advisable if not already in place that a working from home arrangement is in place.

If an employee does qualify for the tax and NIC free exemption the employer can pay via two routes;

1. A standard amount as set by HMRC of £6 per week from April 2020 (£26p/m)
2. Cover the full additional amounts but records need to be kept.

For employees who do not receive the above reimbursements from their employer, they may be able to claim the relief if they have had to work from home and the additional costs incurred are wholly, exclusively and necessary for them to carry out their duties. HMRC has now launched an online portal for employees to claim tax relief for working from home.

If you are self-employed

For those who are self-employed there are more lenient rules when it comes to working from home and are not based on fixed or variable costs.

If an individual works more than 25 hours from home, they can deduct a flat rate expense each month, which are as follows:

• 25 – 50 hours working from home per month allows a flat rate amount of £10 per month
• 51 – 100 hours working from home per month allows a flat rate amount of £18 per month
• 101+ hours working from home per month allows a flat rate amount of £26 per month

If the individual’s work from home hours vary from month to month, then so can the claim.

The flat rate does not include costs for telephone and internet bills a separate deduction for the business element can also be deducted.

Alternatively, a self-employed individual can claim the business element of the actual running costs of the property on a just and reasonable basis.

The most common method is dividing the expenses by the amount of rooms used for business and the amount of time spent in those rooms for business activities. For example, if the house has 5 rooms and one of the rooms is used for business 90% of the time, then claim would be 1/5 of the allowable expenses multiplied by 90%.

It is advisable not to allocate a whole room solely for the purposes of business and there is some private element for that room; if the property were to be sold in the future then a capital gains implications could arise on the business room in the property.

Allowable expenses include; electric, gas, broadband, mortgage interest etc.