Working from Home Allowance Calculator – employed individuals

May 27, 2021

Working From Home Tax Relief Guide for employees and directors 

As a company Director or employee, you can claim tax relief for additional household costs if you must work at home regularly, either for all or part of the week.  

You can either claim tax relief on a: 

  • Flat rate basis 
  • Actual cost basis 

Claiming for working from home tax relief 

An employee can claim tax relief for working from home if: 

  • Their contract states that it’s a requirement of the job. 
  • An employer provides a letter confirming that they work from home as part of their duties.  

However, an employee cannot claim tax relief if: 

  • They choose to work from home themselves. 
  • If the employer covered the expenses or paid them an allowance. 

HMRC allows limited companies to pay their directors or owners nominal expenses to cover general costs for working from home. 

Flat rate basis 

Under a flat-rate basis, employees and director expenses are claimable up to £26 per month, or £6 a week. You don’t need any approval or authorisation to make these nominal payments. You also don’t need to keep any specific evidence or records of the costs incurred by working from home. 

Actual cost basis 

You can usually claim a higher sum if your working from home actual costs are higher than £6 per week.  

In that case, you must establish how much extra you are spending on household bills due to working from home by: 

  • Divide your property into rooms 
  • Split allowable costs between them 
  • Work out the balance of the cost attributable to running your home office or workshop. 
  • Calculate the number of hours worked and prorate your expenses over time spent working and personal time at home. 

You must prove to HMRC – you made a ‘fair and reasonable’ calculation when making a claim. You will need evidence such as receipts, bills, or contracts to show the exact amount of extra costs you have incurred above the weekly amount. 

How much is the working from home relief worth? 

You will get tax relief depending on the rate you pay tax. For example, if you pay the 20% Basic Rate and claim tax relief of £6 a week, you will get £1.20 per week in tax relief (20% of £6). A higher-rate taxpayer would receive £2.40 a week (40% of £6 a week). 

When claiming, you can backdate claims for up to four years and will receive a lump sum payment if HMRC approves 

What are the claimable expenses? 

You cannot claim tax relief for the whole bill – only claim what relates to your work. You may be able to claim tax relief for: 

  • Gas and electricity 
  • Metered water 
  • Business phone calls, including dial-up internet access 

 Unlike self-employed individuals, you cannot claim the cost of rent or mortgage interest via your workplace from home allowance 

How will I get the money? 

Once your application has been approved, your tax code will be adjusted for the tax year, and you will receive the tax relief directly through your salary. 

Calculate your working from Home Allowance now! 

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Information provided on the site is merely guidance that may change in line with UK law and regulations. Users must not consider this to be financial advice or their sole resource when making any financial decision. Spondoo is a trading name for Accounting SQL Limited, authorised & license accounting firm under the Institute of Financial Accountants.

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