What Is The Real Limit Of Tax Free Home Working Payments?

If you work from home, your company can provide tax and national insurance free help in many different ways. What are these ways?

Homeworking Costs: if you look at the HMRC website and related publications, you will see that the maximum tax and national insurance free amount your company can pay for you working from home is £4 per week.

However, this is not completely correct as there are three ways to help with these costs:

1)     Accommodation, supplies & services (which also includes the use of equipment and facilities). Your company can pay and provide for office furniture & equipment such as desks, computers, telephones etc, stationery & normal office/workshop supplies

This can be achieved on the basis that they are intended only to be used for the purposes of employment and there is an insignificant amount of private use. This means that there is no resulting tax and national insurance charge on these amounts

2)     A limited cash payment for additional costs which is an income tax and national insurance free amount paid by the company to the director/employee, provided there is an agreement between the two parties (i.e. the company and the director/employee) for them to work from home

This payment is in recognition of the additional household costs which result from the director/employee being at home rather than at the office

HMRC will certainly accept a payment of £4 per week without the need for either the employer or the director/employee to provide evidence of the additional costs.

However, there is actually no limit on the amount which can be paid if it only covers these additional costs. This can include energy and telephone bills, broadband etc

If you wish, it is also possible to agree with HMRC a rate higher than £4 per week providing that it can be realistically justified!

3)     An unlimited cash payment to cover a proportion of all costs, not just the additional amounts mentioned above. This is certainly a tricky area with HMRC and they do fight many of these claims.

There is however a difference between a limited cash payment and an unlimited one in that the limited payment clearly identifies which expenses it covers and is therefore wholly and exclusively incurred by the director/employee in working from home.

Their job must also require them to work from home.

This is really a last resort option as in reality either options (1) or (2) should cover the costs.

If you require any further information in relation to this area of tax law, please contact Vicky Evans, Director of Babcock Tax & Accountancy Services Ltd on vicky@babcocktaxservices.co.uk.


If you would like our help to understand the implications in more detail for your specific situation, call us today on 02394 003600 or click on the ‘Request Call Back’ button below and we will be happy to have a chat.

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