Covering Your Employees’ Working From Home Expenses in England

If you have employees working from home, you can cover all or part of these expenses as their employer. Being aware of your employees’ expenses they incur when working from home is crucial because you may have to report on aspects of tax, National Insurance and other reporting duties to HM Revenue & Customs (HMRC). You should also note that while the rules changed during the COVID-pandemic, these rules no longer apply from April 2022. This article will explain your obligations toward covering your employee’s working from home expenses in England and Wales.

What Are Home Working Expenses?

Home working expenses are where you choose to reimburse the expenses your employees incur from working from home. These expenses can include:

• home office equipment such as computers;
• office furniture;
• access to the internet;
• stationary;
• paper;
• telephone bills;
• lighting costs;
• increase in insurance premiums;
• household expenses such as gas costs; and
• electricity costs.

When Should  Employers Pay Home Working Expenses?

You can pay your employees’ expenses for home working arrangements under certain conditions as an employer. You can fully expense any equipment, service and supplies you give to your employee for working from home, provided that:

• they are only for work-related usage; and
• if your employee uses the equipment for personal use, their usage must be insignificant. 

However, you can cover other household expenses where your employee has no choice but to work from home. For instance, your: 

• typical workplace might not have the equipment your employee needs to conduct their work; or
• employee must work from home because they live too far away to commute to your workplace. 

Home Working Expenses and Workplace Policies

As an employer, you should make decisions about certain aspects of home working and expenses. Importantly, you should make your decisions clear in a written workplace policy. For example, you should make it clear that your employees need to:

• demonstrate a regular home working pattern, such as the same number of days per week and that this should be a written agreement with you;
• understand that their  use of the equipment should be for business purposes only or any personal use must be insignificant;
• either reimburse costs or claim any tax relief on home working expenses depending upon what you choose; and 
• keep records of the expenses incurred.

By clearly stating whether you will cover working from home expenses in a policy, your employees can better anticipate what expenses you will cover. 

Tax and Home Working Expenses

When your employee incurs working from home expenses, there are times when you are liable for tax. Your tax obligations can include reporting the expenses and paying the relevant tax. In this instance, you should use a P11D form, and you may need to pay Class 1A National insurance.

Some home working expenses, however, do not give rise to tax obligations. For example, you do not have to report or pay tax:  

• if you provide equipment that your employees only use for business purposes; or
• where your employee’s use is predominantly for a non-work purpose. 

Additionally, you do not have to restrict your employees’ mobile phone or SIM card usage for non-business or private purposes. However, you can cover these expenses where employees use phones to conduct work.  

Where you reimburse your employee’s broadband costs, no tax requirements are due, providing:

• they did not already have an existing broadband connection; 
• the broadband is for homeworking; and 
• broadband is primarily used for work purposes.

Key Takeaways

You can cover some of your employees’ expenses if you allow your employees to work from home.  If you do, you should be aware of the rules regarding this and whether or not tax requirements occur. Importantly, it is helpful to implement a policy regarding home working expenses. A workplace policy covering home working expenses will enable your employees to understand what you expect from them in terms of the use of the equipment and any records they should keep.

If you need help understanding how you can cover your employees’ expenses for working from home in England and Wales, our experienced employment lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. So call us today on 0808 196 8584 or visit our membership page.

Frequently Asked Questions