Tax-free Reimbursements for Homeworking Employees

If Employees regularly work from home, you can make tax-free payments to reimburse them for some of their household expenses. The HMRC will approve a tax and NI-free payment of up to £6 per week (or £26 per month, if your staff are paid monthly) to go towards these costs. You also may be able to reimburse a greater amount weekly if you are able to provide evidence to show that the payment will be fully going towards additional expenses incurred due to working from home, for example, additional heating costs. If the costs would be the same regardless of whether the employee is working from home or not, then they will not be covered.

If you do not reimburse the employee for these expenses, then they may be able to claim tax relief themselves. They will only be able to do this if they can demonstrate that their additional household expenses were incurred “wholly, exclusively and necessarily” in the performance of their duties. For example, the cost of business phone calls, or electricity costs for a home office. They also will only be able to claim tax relief if they are working from home out of necessity rather than choice, e.g. because your office is too far for them to travel to. These employees are also entitled to a deduction of £6 per week (£26 per month) without needing to keep evidence of their extra costs. If they wish to deduct more than this then they must keep evidence and records to show the exact amount of extra costs they have incurred over the weekly amount.