Working from home: how to reduce your tax bill


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If you work from home, you can claim the extra electricity you use

If you’ve been working from home for the past few months, you might just be saving on travel costs and lunches, but you’ll have to pay other bills, including heat and electricity.

Some employers pay their staff an allowance to cover these additional costs.

But if they don’t, employees can still claim a small reduction in their taxes for the time they’ve been forced to work from home.

How much can I claim?

It would be very difficult to calculate exactly how much of your utility bill is being used for work – so HM Revenue and Customs (HMRC) allows you to claim up to £ 6 per week of expenses without having to provide invoices or documents. to justify it.

That doesn’t mean you save £ 6 per week – you only save the tax you would have paid on it. This equates to £ 1.20 per week (or around £ 62 per year) for a base rate taxpayer, or £ 2.40 per week (£ 104 per year) for a higher rate taxpayer.

And you have to work from home because you have to, not by choice.

It is possible to claim more than £ 6 per week, but you must provide documentation to support your claim.

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Fortunately, you don’t have to calculate exactly how much you spent working from home.

If your employer provides a homework allowance, it is tax exempt up to £ 6 per week – so you cannot make another request for tax relief on top of that.

These allowances have been available for years, but awareness has grown since the pandemic forced many offices to close.

“We’ve had a number of calls about this,” says Yvonne Graham, tax director at Ensors Accountants in Ipswich. “It won’t make people rich, but it is a useful sum. ”

Prior to April 6, 2020 you were only allowed to claim £ 4 per week without providing evidence. It is still possible to claim a refund until April 2016, but for previous years you can only claim the lower rate.

Case study: the long-term home worker

Emma Peck, who works in financial services in Buckingham, has been claiming the full allowance since she started working from home in 2017.

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Emma Peck


Emma Peck has been claiming homework fees since 2017

She does not have an office to go to, so she is forced to work from home and therefore has the right to complain.

Previously, she was self-employed and used to claim expenses to reduce her tax bill, as many self-employed people do.

So each year, when she receives her “coding notice” from HMRC, which shows how much she can earn before paying taxes, she includes an allowance for “employment expenses” – the cost of working from home.

This year it’s £ 312 – in other words, 52 x £ 6 per week.

Emma encouraged many of her work-from-home colleagues to do this as well. “The thing with people who are PAYE, they’re used to having everything done for them. They are afraid to go to the HMRC website. “

How do you make a complaint?

There are two ways to claim expenses: either on your annual tax return, if you file one, or on a special form called P87, which is available electronically through Government Gateway, or in hard copy.

If you work from home indefinitely, you can change your tax code like Emma to save money regularly.

If you’re only working from home for a short time, it makes sense to wait until you return to work, so you know how much to ask.

HMRC said in a statement: “Employees can claim the P87 expense at any time, but claiming when they return to their workplace means their claim will be for the correct amount and they will only have to contact us. ‘just once. “

Can you claim other things?


Home workers can claim the additional cost of heating

If you had to buy, for example, a computer or an office chair to be able to work from home, your employer could reimburse you.

Otherwise, you can claim tax relief on what you bought, as long as it is used “wholly, exclusively and necessarily” for the job.

You will need to keep records and claim the correct amount.

You can also request business phone calls in addition to the flat rate of £ 6 – again you will need to keep records and claim the exact amount.

But you can’t claim home expenses that don’t go up because you’re working there now. This includes housing tax payments, rent, mortgage interest, or water – unless you have a water meter.

Case study: the new applicant

Jonathan Griffin from South Yorkshire works in IT. He has been working from home since March 23.

He filed a claim using a P87 form for the tax on seven weeks of expenses starting April 6.

This would come down to £ 6 x 7 = £ 42. As a base rate taxpayer he will recover 20% of that amount, or around £ 8.40.

He filed the complaint online with HMRC on May 23, which he found “fairly straightforward.” There is a tracking tool on the HMRC website, which initially stated that it would be processed on June 15.

But at the time of writing, the payment still hasn’t arrived and the tracker says it’s still processing.


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