With so many of us working from home, we are incurring different kinds of expenses. So what is, and isn’t taxable and what can, and can’t we claim?
Not taxable, where the employer pays for:
- One mobile phone, no restriction on private use
- Installing new broadband at home, restricted private use
- Laptops, tablets, computers, office supplies used mainly for business purposes, no significant private use
- Salary advance or loans less than £10,000 in a tax year
- Electricity, heating, new broadband – £4 a week (£18 a month) to 5 April 2020; £6 a week (£26 a month) thereafter. Anything above needs supporting evidence, or becomes taxable.
Taxable, where the employer reimburses expenses for:
- Electricity, heating, new broadband in excess of £4/£6 a week (£18/£26 a month) without supporting evidence
- Employee’s existing broadband at home
- Office equipment the employee has bought, unless it is being bought on behalf of the employer*
*Since the time of writing, HMRC has updated the rules to allow reimbursements for office equipment to be non-taxable. The relaxing of the rules state that where this expense is reimbursed by the employer, it is not taxable provided private use is insignificant. However, where the employer does not reimburse the expense, the employee can only claim a deduction if there is no private use.
These apply whether the benefits are given to directors or employees.
Where expenses are not reimbursed by your employer, you can claim a tax deduction in your tax return provided the expenses are incurred wholly, exclusively and necessarily for performing duties of employment.
What about self-employed?
For sole traders, or partnerships where all other partners are individuals, who are not VAT registered, there is an option to claim for use of home as office, a flat rate of between £10 to £26 per month, depending on the number of hours spent working. Alternatively, use an exact calculation with supporting evidence.
And of course other business expenses that are incurred wholly and exclusively for trading purposes are deductible.
Payment of tax
If you are due to make a Self Assessment tax payment on account on 31 July, you can choose to pay on 31 January 2021, provided the amount is under £10,000. This applies to the self-employed as well. It is automatic – applications not needed. There will be no penalties or interest for late payment. You can still make payment in July if you wish.
For businesses, VAT payments due before 30 June 2020 can be deferred until 31 March 2021. You still need to file the VAT return on time. You don’t need to inform HMRC that you are choosing to pay later. Simply don’t make the payment. If you use direct debit to make payments, you will need to cancel the direct debit.
For help with payment of all other taxes, you need to contact HMRC.