In this section:

  • Expenses and benefits A to Z

Homeworking

This guide explains your tax and National Insurance contributions (NICs) obligations if you provide equipment, services or supplies for business purposes to an employee who works from home, or if you reimburse any additional expenses they incur by working from home.

On this page:

You provide equipment, services and supplies for business-only use

Definitions or restrictions

You provide equipment, services or supplies for business-only use to an employee who works from home. Any private use of the items provided is insignificant.

Examples would include: a computer, office furniture, an Internet connection, pens and paper.

What to report, what to pay

You have:

  • no reporting requirements
  • no tax or NICs to pay

Top

You provide equipment, services and supplies for business and private use

Definitions or restrictions

You provide equipment, services or supplies to an employee who works from home. These are used for both business and private purposes.

Examples would include: a computer, office furniture, an Internet connection, pens and paper.

What to report, what to pay

For employees earning at a rate of less than £8,500 rate per year, you have:

  • no reporting requirements
  • no tax or NICs to pay

For company directors or employees earning at a rate of £8,500 or more per year:

  • report on form P11D – section L
  • pay Class 1A NICs on the value of the benefit

Work out the value to use

The value to use is the cost to you of providing the equipment, services or supplies.

Top

Reimbursing additional household expenses

Definitions or restrictions

You reimburse an employee for additional household expenses – such as gas or electricity charges - incurred because they have to work from home because either:

  • the facilities they need for their work aren’t available at your workplace
  • their work requires them to live too far from your workplace for it to be reasonable for them to travel there on a daily basis

What to report, what to pay

Provided the amount you reimburse doesn’t exceed the employee’s additional household expenses, then you have:

  • no reporting requirements
  • no tax or NICs to pay

(For payments of up to £3.00 per week, you don’t need to provide any records of the household expenses you’re covering. For amounts above £3.00 you need supporting evidence to show that your payment to the employee is no more than the additional household expenses they’ve incurred.)

If the amount you reimburse exceeds the employee’s additional expenses, then it counts as earnings so:

  • add the excess – as described below - to your employee’s other earnings
  • deduct and pay PAYE tax and Class 1 NICs using your usual payroll procedures

Work out the value to use

If you have no supporting evidence for your reimbursements, the amount to put through your payroll is any excess above £3.00 per week.

If you have supporting evidence that shows the level of your employee’s additional household expenses, then you only need to put through your payroll any amounts you reimburse that exceed these additional expenses.

Top

Understanding the £8,500 threshold

To check what's included in the £8,500 threshold for P11D reporting purposes, follow the link below.

End-of-year forms at a glance

Top

Technical guidance

EIM01472: Household expenses - payments to reimburse additional costs<

EIM21611: Supplies and services provided other than on the employer's premises

EIM32825: Relation between deduction for employee’s expenses and exempt homeworking payments

Top