Working from home and tax relief for employees

What does the evolution of technology and flexible working mean for tax relief for employees? In this piece, we find out.

Over the past ten years the evolution of technology has opened doors to new working opportunities for employees. It was not that long ago that mobile phones were the size of a brick. Now emails and the internet can be accessed on the move. However, while technology has moved on, travelling to work has become more difficult. The solution has been to offer employees flexible work from home. But what does this mean for tax relief for employees?

Expenses and tax relief for employees

When employees are required to work from home as part of their contracted work, it becomes essential for their employer to reimburse them for any household expenses they incur as a direct result of carrying out their employment duties at home. In the absence of support from their employer, employees are within their rights to claim tax relief for the expenses on their self-assessment tax form if you complete one or through correspondence under the PAYE system. HMRC defines this form of business tax relief as the use of your personal savings for travel or items you must purchase for your job. If you only use home in a minimal way to carry out work duties, such as writing up business records, the HMRC will now accept a £4 per week, or £208 per year, office deduction.

In order to make a claim, employees should keep a detailed record of all payments outlining how additional household expenditure was incurred during their working hours. And, we’d recommend you do the same! Create a spreadsheet or logbook with all payments listed so in the event of any questions arising regarding employee expenses it is clear what needs to be covered.

Travel and mileage

Where the employee’s workplace is their home and they are travelling to their visit the company’s office building (ie regular commuting), these journeys will not be eligible for tax relief. If the employee is visiting a client for a business meeting across town, the cost of travel should be eligible for tax relief and will need to be accounted for in the same way as office-based employees.

To work out if your employees are legitimately owed money back for travel, request they add up their business mileage for the year and multiply it by the approved mileage rates. This will give you an accurate calculation of their travel costs.

Utility bills

When employees are required to work from home, it’s important they keep warm, comfortable and equipped for the day ahead. For this reason, there is tax relief for employees who have incurred costs as a direct result of working from home, such as heating and lighting. The costs of things that must be paid regardless of homeworking, like mortgage payments, water rates or council tax are excluded.

Internet and business calls

Customer expectations are growing all the time and so more and more businesses are turning to the internet for a solution. This means employees who work from home are reliant on the use of good internet access and a phone to make important business calls. If the employee has taken out an internet contract for the purpose of carrying out work duties at home, the employee can claim tax relief on this if their employer does not reimburse them in full for the cost incurred.

Conclusion

The reimbursement of employee expenses is a great way to ensure your employees are not paying out more than is necessary. This will give them peace of mind when working from home and ensure they don’t make a claim for the money you failed to pay out. Allowing your employees to dip into their own pockets to pay for required working materials will put your business’ reputation on the line and could lose you work in the long run. In contrast, letting employees know they can claim tax relief from HMRC for the costs of this can only work in your favour because they may not be aware this service is available to them.

It is important to note the difference between an employee who is required to work from home and choosing to do so, as tax relief for employees will differ in each circumstance.

If you would like any further information about what expenses should be reimbursed, or perhaps you’re an employee looking to make a claim for tax relief, then please seek advice from a professional with expert knowledge and experience in accepted Tax Rebates.

Further reading on tax relief

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