Since April 2011 employers have been able to pay their employees a tax-free allowance to cover the additional costs incurred when the employee works at home on a regular basis under an agreed home working arrangement. The flat rate of this allowance was raised from £4 to £6 per week from 6 April 2020 (from £18 to £26 per month).
The employee does not have to keep any records of costs or provide any evidence to their employer of the extra expenses they incur by working at home. However, if more than the flat rate is paid by the employer, the employee will have to demonstrate how their additional costs exceed the flat rate.
As Helen Thornley explained in her guide to tax reliefs to support homeworking, this homeworking allowance is given under ITEPA 2003, s 316A, which only applies to amounts paid by the employer to the employee.
If the employer doesn’t pay the homeworking allowance to employees who are required to work at home, the employees can claim a deduction for the additional costs they incur under ITEPA 2003, s 336 directly from HMRC.
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