Allowance for Work From Home UK 2025 | Claim Tax Relief

The allowance for work from home in the UK is a tax-free payment or tax relief that helps employees cover extra household costs such as electricity, heating, and internet while working remotely. Employers can reimburse up to £6 per week tax-free, or employees can claim this relief directly from HMRC if not reimbursed.

Allowance for Work From Home: What It Means in the UK

A work from home allowance is financial support provided to employees, or a tax relief claimed by them, designed to offset the additional household expenses incurred when working remotely instead of at an employer-provided office. Its primary purpose is to ensure that workers are not financially burdened by costs that would typically be covered in a traditional office environment. This can include direct monetary stipends from employers or tax relief claimed directly from HM Revenue & Customs (HMRC) for eligible expenses.

Common Components Covered by WFH Allowances

For those working from home in the UK, various expenses can be covered either through an employer's allowance or by claiming tax relief, subject to specific conditions:

Direct Household Costs:

    ◦ Heating, electricity, and metered water: These are common additional costs due to increased home usage for work.

    ◦ Business phone calls: The cost of calls made exclusively for work purposes can be claimed.

    ◦ Internet costs: Generally only claimable if the employee did not have internet before working from home and subscribed specifically for work, or if there's a demonstrable increase in usage due to work needs. Existing broadband subscriptions are typically not covered unless there's an increase in cost due to work.

Office Equipment & Furniture:

    ◦ Laptops, mobile phones, office chairs, and desks may be provided by employers. If employees purchase essential equipment and are not reimbursed, they may be able to claim tax relief if the items are used "wholly, exclusively, and necessarily" for work. However, HMRC considers it rare for equipment bought to enable work (like a desk or chair) to qualify as an expense incurred in the performance of duties. Capital allowances might be an alternative route for some equipment.

Other Potential Expenses (primarily for self-employed or specific scenarios):

    ◦ A proportional amount of rent or mortgage interest, council tax, and home insurance can be claimed by self-employed individuals. These are generally not claimable by employees as they are costs incurred regardless of working from home.

    ◦ Cleaning costs specifically related to the work area.

    ◦ Office supplies like stationery or printer ink used solely for work.

    ◦ Certain professional fees and subscriptions if required for the job.

UK Tax Implications and Exemptions for WFH Allowances

The tax treatment of work from home allowances in the UK depends on whether it's an employer reimbursement or an employee claiming tax relief:

Employer Reimbursement (UK Context)

• Employers can pay £6 per week (£26 per month) tax-free to cover homeworking costs without needing receipts.
• Higher payments allowed if employers keep detailed records of actual expenses.
• No double claiming — if an employer reimburses, employees cannot claim extra from HMRC.
• Employers can provide equipment (laptops, desks, chairs, internet) tax-free, as long as private use is minimal.

Employee Tax Relief (UK Context)

Employees can claim tax relief directly from HMRC if their employer does not reimburse their work-from-home expenses, but strict eligibility criteria apply:

Eligibility: You must be required to work from home as a necessity for your job, not by personal choice. This includes situations where:

    ◦ Your employer does not have an office or a suitable workplace available.

    ◦ Your job requires you to live far from the office, making daily commuting unreasonable.

    ◦ Government restrictions required you to work from home (applicable for specific past tax years, e.g., during the COVID-19 pandemic).

    ◦ You cannot claim if you choose to work from home, or if your employer has an office available but you prefer to work remotely.

Claiming Methods:

• Flat rate: £6 per week / £26 per month (no receipts needed).
• Actual costs: Claim higher expenses with evidence (utility bills, internet, calls).

Tax Relief Amount:

The relief you receive is based on your income tax rate:

• 20% taxpayer → £62.40 per year
• 40% taxpayer → £124.80 per year
• 45% taxpayer → £140.40 per year

Self-Employed Individuals (UK Context)

For self-employed individuals, the rules for claiming home office expenses are generally more flexible.

Simplified expenses (flat rate):

• 25–50 hours/month → £10
• 51–100 hours/month → £18
• 101+ hours/month → £26

• Actual cost method: Claim a proportion of rent, mortgage interest, council tax, utilities, internet, and workspace repairs (records required).

Step-by-Step Guide for UK Employees to Claim Tax Relief

If you are a UK employee and meet the eligibility criteria, follow these steps to claim your work from home tax relief:

1. Determine Your Eligibility: First and foremost, ensure that working from home is a requirement of your job, not a personal choice. This is the most crucial condition.

2. Choose Your Claim Method: Decide whether to claim the flat rate of £6 per week (requires no receipts) or the exact amount of your additional costs (requires detailed evidence).

3. Gather Evidence (If Claiming Actual Costs): Collect and keep copies of all relevant receipts and bills for eligible expenses such as increased gas, electricity, and business phone calls.

4. Submit Your Claim to HMRC:

•  Online Service: For most employees not filing a Self-Assessment tax return and claiming £2,500 or less in total employment expenses, use HMRC's online service. You'll need a Government Gateway ID.
•  P87 Form: If you prefer, or if directed, you can submit a P87 form (available electronically or on paper). This is used for total employment expenses, including WFH costs, up to £2,500.
• Self-Assessment Tax Return: If you already complete a Self-Assessment tax return, you must include your claim in the "Employment Expenses" section of your return. You cannot use the online service if you file Self-Assessment.

5. Consider Backdated Claims: You can claim tax relief for the current tax year and up to the previous four tax years. For example, the deadline for the 2020/21 tax year claim is April 5, 2025, and for 2021/22 it's April 5, 2026.

6. Receive Your Relief: If your claim is approved, HMRC will typically adjust your tax code for the current and future tax years, meaning you'll pay less tax from your salary. For claims covering previous tax years, you may receive a tax refund, often via a cheque. Remember to notify HMRC if your working from home arrangements change.

Employer Best Practices for Structuring WFH Allowances (UK Context)

For UK employers, establishing clear and compliant work from home allowance policies is crucial for employee satisfaction and legal adherence:

1. Develop a Clear Policy: Outline what expenses are covered, the amounts provided (e.g., the £6/week flat rate), and the eligibility criteria in your remote work policies or employment contracts. This clarity avoids ambiguity and fosters trust.
2. Ensure Regulatory Compliance: While this guide focuses on the UK, businesses operating internationally must be aware of and comply with specific local legal requirements regarding WFH allowances and reimbursements in each country.
3. Offer Tax-Free Reimbursements: Proactively reimburse employees for their additional household expenses, up to the £6 per week tax-free flat rate, or for actual justified costs, to simplify the process for employees and remove their need to claim from HMRC.
4. Provide Necessary Equipment: Furnish employees with essential office equipment and internet connections. This can be done tax-free for the employee, provided the equipment's sole purpose is work and private use is insignificant. This also helps ensure health and safety standards are met.
5. Maintain Fairness and Equity: Ensure that salary and benefits packages for remote workers are comparable to those for office-based employees. In the UK, failing to do so could lead to potential discrimination claims, particularly concerning flexible working requests from women or reasonable adjustments for disabled workers.
6. Support Employee Wellbeing: Actively encourage employees to establish a clear routine, set up a dedicated workspace, and take regular breaks to prevent burnout. Foster continuous connection through regular team meetings and informal catch-ups to combat feelings of isolation and maintain morale.

Conclusion:

Understanding and correctly applying the work from home allowance is essential for both UK employees seeking to reduce their tax burden and employers aiming for compliance and employee retention. While the convenience and flexibility of remote work offer numerous benefits, the financial implications must be managed carefully. The specific criteria for claiming tax relief, particularly the requirement for home working to be a necessity rather than a choice, are critical under current UK regulations.

To ensure you are maximizing available benefits and adhering to HMRC's guidelines, review your current payroll structure and expense policies for work from home arrangements. Employees should verify their eligibility and consider claiming any due tax relief, including backdated claims. For intricate situations or to confirm the most up-to-date guidance, consult a qualified UK tax adviser or HR professional. They can provide personalized advice to navigate the complexities and ensure full compliance.

FAQ'S:

1. How much is the allowance for working from home in the UK?
   The allowance is £6 per week (£26 per month). Employees can claim this from HMRC, or employers can pay it tax-free.
2. What expenses are covered?
   Heating, electricity, business phone calls, internet (if newly required for work), and essential equipment provided by employers.
3. Can I claim if I choose to work from home?
   No. You can only claim if your employer requires you to work remotely, or during government restrictions (e.g., COVID-19).
4. Is the allowance taxable?
   No, up to £6 per week is tax-free. Higher payments are allowed if supported by records.