Expenses and benefits: homeworking

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1. Overview

As an employer providing homeworking expenses for your employees, you have certain tax, National Insurance and reporting obligations.

Homeworking expenses include:

  • equipment, services or supplies you provide to employees who work from home (for example computers, office furniture, internet access, pens and paper)
  • additional household expenses, such as gas or electricity charges, for employees who need to work from home

2. Homeworking expenses and benefits that are exempt from tax

You do not need to report or pay tax for some homeworking expenses and benefits.

Equipment, services and supplies

If you provide equipment, services and supplies to an employee who works from home, you do not have to report or pay tax if either:

  • they’re only used for business purposes
  • any non-work use (‘private use’) is insignificant

This includes laptops, tablets and computers. You can decide how much private use you allow but you need to state this clearly to employees.

You do not need to pay tax or restrict private use on mobile phones and SIM cards. These are restricted to one per employee.

Equipment your employee bought during coronavirus (COVID-19)

You can reimburse your employee for equipment they bought to work from home because of COVID-19. Until 5 April 2022, you do not have to pay tax on it if the employee:

  • agreed the purchase with you in advance
  • mainly uses the item for business purposes
  • keeps the equipment

Equipment you provided during COVID-19

You may have supplied employees with office equipment so they could work from home. You do not have to pay tax on this as long as they return the equipment to you.

Additional household expenses

If you cover the cost of additional household expenses for an employee who works from home, you do not have to report or pay tax if both of the following apply:

  • they are working at home as agreed with you and they regularly work from home under those arrangements
  • the amount you give them is not more than their additional household expenses or the amount you give them is not more than the current weekly limit

Weekly tax limits

Tax years Weekly limit
2020 to 2021 onwards £6.00 (or £26 a month for employees paid monthly)
2012 to 2013 — 2019 to 2020 £4.00 (or £18 a month for employees paid monthly)

Broadband

You do not have to report or pay tax if you reimburse an employee’s broadband fee if all of the following apply:

  • a broadband connection was not already available
  • they need it to work from home
  • it is mainly used for business purposes

3. What to report and pay

If any of the homeworking expenses you cover are not exempt from tax, you may have to report the costs to HM Revenue and Customs (HMRC), and deduct or pay tax and National Insurance on them.

Equipment, services and supplies

If you provide these for both business and private use, you must:

If you let your employee keep equipment you provided during coronavirus (COVID-19) you need to record it as an employee benefit. The charge will be on the market value of the equipment at the time you agreed the employee could keep it minus any amount the employee paid towards it.

Additional household expenses

If you cover any costs over the weekly limit (£6, or £26 a month for employees paid monthly), you need to be able to prove that the payments are no more than your employee’s additional household expenses.

If the payments you make are more than your employee’s additional household expenses they count as earnings, so you’ll need to:

  • work out the excess and add this to your employee’s other earnings
  • deduct and pay PAYE tax and Class 1 National Insurance through payroll

You can report any expenses or benefits related to COVID-19 on your PAYE Settlement Agreement.

If you are providing any non-cash benefits (‘benefits in kind’) through payroll you can continue to report expenses and benefits in this way. You can also continue to report expenses and benefits through a P11D form.

4. Work out the value

Equipment, services and supplies

Use the cost to you of providing the equipment, services or supplies.

Additional household expenses

If you do not have any supporting evidence of the cost of your employee’s additional household expenses, use the total cost to you minus the £6 a week limit (£4 up to 5 April 2020).

If you do have supporting evidence that shows the level of your employee’s additional household expenses, use any amount above these additional expenses.

5. Technical guidance

The following guides contain more detailed information: