What you need to know about claiming expenses and tax refunds for working from home

The taxman and your employer should help you out with some of the additional expenses homeworking creates. Here’s what you need to know.

With the government recommending that we all avoid “non-essential travel” and offices where we can, more and more of us are going to be working from home. The good news is that the taxman and your employer should help you out with some of the additional expenses homeworking creates. Here’s what you need to know.

Claim the homeworking allowance

If you and your employer have agreed that you are going to work from home regularly you can claim a homeworking allowance. This is tax-free and paid by your employer. “Reimbursements can only cover reasonable additional costs incurred by any homeworking employee,” says Kaisha Langton in the Daily Express. The allowance covers extra heating and lighting costs, additional insurance you might require, increased water bills and telephone and broadband charges. It is currently £4 a week, rising to £6 on 6 April 2020.

Get the taxman to cover your expenses

Your employer may cover other things you need for homeworking either through expenses or by loaning you equipment such as a laptop or printer. If you need more than that HMRC can help. “You will have to pay for the items yourself, but the taxman can help you get back some of your money as employment expenses via a P87 form,” as David Byers points out in The Sunday Times.

The self-employed will be used to claiming homeworking expenses via their self-assessment form. But people who usually work in an office don’t generally need to fill in a tax return. 

This is where P87 comes in. If you are an employee with allowable expenses that amount to less than £2,500 in the tax year you can claim tax relief using the P87 form.

According to HMRC you can claim tax relief for expenses that are incurred “wholly, exclusively and necessarily” while doing your job.

Don’t get carried away

Anything you buy and claim on a P87 form has to be used entirely for work. In other words, a desk chair or stationery is permissible, as is paying for broadband. But you can’t claim for milk and teabags.

What you get back

The amount you receive depends on your income-tax bracket. For instance, a basic-rate taxpayer who spends £1,000 on office equipment will get £200 back: 20% of £1,000. A higher-rate taxpayer would get £400.

Recommended

The simple way to invest in iconic classic cars
Advertisement Feature

The simple way to invest in iconic classic cars

Alternative and passion investing are areas that have seen considerable growth in recent years, but some asset classes have priced investors out. Now,…
25 Nov 2022
7 ways to reduce your inheritance tax bill
Inheritance tax

7 ways to reduce your inheritance tax bill

The inheritance tax threshold cap has been extended until 2028, which will result in higher tax bills for many - we look at how to keep you inheritanc…
25 Nov 2022
Best junior stocks and shares ISA platforms
Isas

Best junior stocks and shares ISA platforms

A junior stocks and shares ISA is a great way to save for your child tax-efficiently. But it can be confusing deciding which investment platform to ch…
25 Nov 2022
Best savings accounts – November 2022
Savings

Best savings accounts – November 2022

Interest rates on cash savings are making a comeback. We look at the best savings accounts on the market now
25 Nov 2022

Most Popular

Wood-burning stove vs central heating ‒ which is cheapest?
Personal finance

Wood-burning stove vs central heating ‒ which is cheapest?

Demand for wood-burning stoves has surged as households try to reduce their heating costs this winter. But how does a wood burner compare with central…
21 Nov 2022
Fan heater vs oil heater – which is cheaper?
Personal finance

Fan heater vs oil heater – which is cheaper?

Sales of portable heaters have soared, as households look to cut their energy costs. But which is better: a fan heater or an oil heater? We put them t…
21 Nov 2022
Buying vs renting: as mortgage rates rise, which is cheaper?
Property

Buying vs renting: as mortgage rates rise, which is cheaper?

In the UK, buying a home has traditionally been the preferred option over renting. But is that still true? Rebecca Goodman asks: which makes more sen…
18 Nov 2022