Tax relief

There is a possibility of claiming tax relief on the costs incurred by working from home, for example, heating, electricity and lighting. But this means that, before homeworking begins, the employee and the employer need to be clear who is paying for what.

An employed earner (that is, anyone paying PAYE tax and national insurance) who is required (as opposed to choosing) to work from home can claim tax relief for extra household costs, such as extra heating, metered water bills, home contents insurance, business calls or a new broadband connection, that result from being required to home work. This does not include costs that stay the same wherever someone is working, such as rent or council tax.

Basic rate taxpayers can claim a tax rebate of £1.20 a week (20% of £6) without providing any paperwork. Higher amounts that reflect the actual increased costs can be claimed, but only with the supporting paperwork, such as receipts, bills or contracts.

Tax relief can also be claimed on the cost of substantial office equipment, such as a computer that workers need to buy out of their own money to do their work. There must be no substantial private use.

Any amount contributed by the employer (for example, to heating, phone bills and so on) must be deducted before claiming tax relief. Full guidance on the tax implications of homeworking is available at the gov.uk website.