Working from home has become a normal part of life for many employees and businesses.
However, if you work from home, or have employees who do, it’s important to understand what expenses can be reimbursed tax-free and what tax relief may be available.
Recent changes have made this area more restrictive, so employers and employees alike need to know where they stand.
What expenses can homeworking employees incur?
When an employee works from home, they often face additional household costs.
These may include:
- Increased heating and lighting costs
- Business phone calls made from a home phone
- Additional cleaning costs
- Extra insurance costs linked to homeworking
These are costs that arise because the employee is working from home, rather than attending their usual workplace.
Can employers reimburse homeworking expenses tax-free?
Yes.
There is a specific tax exemption that allows employers to reimburse qualifying homeworking expenses without creating a tax charge for the employee.
However, there are conditions.
The employee must be working from home under an arrangement with their employer rather than simply choosing to work from home.
In addition, the reimbursement must relate to genuine additional household costs caused by homeworking.
Costs that would exist regardless of where the employee works, such as rent, mortgage payments or council tax, do not qualify.
The simple £6 per week allowance
Calculating actual additional household costs can be difficult and time-consuming.
To make things easier, employers can choose to pay a fixed homeworking allowance instead.
The current allowance is:
- £6 per week, or
- £26 per month
This can be paid tax-free to eligible employees without the need to calculate actual costs.
Interestingly, the allowance remains the same whether the employee works from home one day a week or every working day.
For many employers, this provides a straightforward way to support employees without creating additional administration.
Can employees still claim tax relief themselves?
This is where the rules have changed.
Before 6 April 2026, employees who met the conditions could claim tax relief for homeworking expenses.
They could either:
- Claim a fixed deduction of £6 per week (£26 per month), or
- Claim the actual additional costs of working from home
However, from 6 April 2026, this relief was withdrawn.
What changed from April 2026?
Since 6 April 2026, employees can no longer claim a tax deduction for additional household expenses incurred while working from home.
This applies even if the costs are wholly, exclusively and necessarily incurred in carrying out their employment duties.
As a result, employees who are working from home and meeting these additional costs personally can no longer obtain tax relief for those expenses.
What does this mean for employers?
The changes make employer reimbursements more important than ever.
Where employees are required to work from home, businesses may wish to review whether they currently offer the £6 per week homeworking allowance.
For many employers, it’s a simple and tax-efficient way to help employees cover some of the additional costs associated with homeworking.
Need advice on employee expenses?
Employment tax rules can be complicated, particularly when working practices change.
If you’re unsure whether your business can reimburse homeworking expenses tax-free, or you’d like advice on the most tax-efficient approach, contact Jon or the team at Jon Davies Accountants.
We’ll help you understand the rules and make sure you’re supporting your employees in the most effective way possible.
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Any questions?
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