During this difficult time, you may have been required or have asked your employees to work from home. Whilst working from home, an employee will incur additional household costs on top of their usual bills.
As an employer, you can choose to contribute towards these additional working-from-home expenses. You can pay your employees the HMRC fixed rate of £6 per week (£26 per month) which doesn't require any additional reporting or Tax/NI to be paid to HMRC. The £6 is paid to your employee as expense reimbursement.
However, if this isn't an option for you, your employees are still able to receive some tax relief from HMRC at the fixed rate mentioned above when it is necessary for them to work from home i.e. Covid-19. In order to receive this tax relief, the employee needs to have paid tax in the year they are making a claim.
The employee will receive tax relief on the rate at the level of tax they pay e.g. 20% or if they have personal income over £50,000 40%. For example, if your employee has worked from home for 6 months they can claim tax relief of £156 (relief of £31.20 at 20% or £62.40 at 40%).
There are a few different options on how your employees can apply to receive the tax relief on working from home:
- If your employee usually completes a Self-Assessment tax return, they'll be able to claim and include the £6 per week under the employment pages for the relevant tax year.
- If your employee does not complete a Self-Assessment tax return, they can set up and claim through their own Government Gateway account or via a P87 postal form.
- Alternatively, you can complete the P87 postal form on your employee's behalf. You would need to complete one form per employee and need certain personal details for the employee which you should have as part of their payroll records.
You can view further information on the options above on HMRC's website here.