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Working from home allowance and ways to treat your employees

Despite government pressure for everyone to return to the office now, there is resistance to this. Employees are enjoying the option to work from home particularly saving time and money on the commute, and employers are seeing the cost saving potential of shutting offices down or reducing the number of people in the office at one time. But what tax reliefs are available for employees working from home?

TAX FREE HOME WORKING ALLOWANCE

The working from home allowance is available to pay employees, tax and NIC free, of £6 a week. This is to cover additional household expenses the employee incurs. There is no need to keep records to justify this expense as long as there is a regular agreement to work from home (not just ad hoc days here and there).

The employer can alternatively reimburse employees for the extra costs they have incurred when regularly working from home under agreed arrangements. However, the employee must keep detailed records of the expenditure as evidence, including itemised billing. Employers are not allowed to reimburse items that have a dual purpose such as council tax, rent, water rates etc. Employers can reimburse the itemised extra cost of heating and lighting etc.

SOME ADDITIONAL TOP TAX TIPS FOR ASSISTING EMPLOYEES WORKING FROM HOME ARE:

Provide an interest free loan of up to £10,000

Employers may want to provide a loan to help out employees. Either to help out in case of financial difficulties or to help set up a home office work space. However, it is really important to put the loan agreement in writing and agree the repayment date. 

Provide small gestures by using the £50 trivial benefits in kind exemption.

As we have said many times in blogs and newsletters a trivial benefit is one that Costs £50 or less to provide (including VAT)

  • It cannot be cash
  • Isn’t a reward for service
  • Isn’t in the terms of the employee’s contract
  • Is not reimbursed. 

Where the payment is made to a director of a close company, (being one with five or fewer shareholders), then there is a £300 cap on the trivial benefits provided in the tax year to the director. 

Supply a mobile phone and a SIM card to an employee

This is not taxable, including any private use. 

Provide a new broadband connection

If a broadband connection is needed in order for the employee to work from home, and one was not already available, this provision is tax free. However, any private use must be limited. 

Pay mileage expenses where employees use their own cars for business trips

The employer can pay approved mileage allowance payments of 45p per mile up to 10,000 miles and 25p per mile after that, tax and NIC free. This applies where employees make journeys for business purposes. 

Providing laptops, tablets, computers, other equipment and office supplies.

The use of these items can be provided by the employer to the employee tax free, provided there is no significant private use. Office supplies provided, such as printer ink, paper for printing for employment work matters is not taxable.

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