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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.

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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.

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