Where an employee works at home, they may incur additional homeworking expenses as a result, such as additional heating and lighting costs, the cost of business phone calls on a home phone, additional insurance costs and additional cleaning costs.
Reimbursed by the employer
The tax legislation contains a dedicated exemption which allows the employer to reimburse these costs without the employee being taxed on the amount reimbursed.
For the exemption to apply, the employee must be working at home under homeworking arrangements with the employer, rather than out of choice. Further, the costs must be reasonable and must be incurred in carrying out the duties of the employment; the exemption does not apply if the employer meets costs which would be the same regardless of whether the employee worked at home or not, such as mortgage interest or rent.
To make life easier, rather than reimbursing actual costs, which can be tricky and time-consuming to work out, the employer can make a tax-free payment of £6 per week (£26 per month) to cover the additional homeworking expenses. The amount is the same whether the employee works at home one day a week or five days a week.
Costs met by the employee
Prior to 6 April 2026, the employee was able to claim a fixed deduction of £6 per week (£26 per month) to cover the additional costs of working at home under a homeworking arrangement. Employees could also claim a deduction based on the actual additional costs of working from home.
However, from 6 April 2026, this all changed. From that date, a deduction for additional household expenses is expressly prohibited regardless of whether they are wholly, exclusively and necessarily incurred in the performance of the duties.
