Working from home allowance – up to £98 per person
Every employee who works from home is entitled to be paid a £3 per week tax-free home-working allowance.
You do not have to pay this week by week. Instead you can choose to pay it as a lump sum (e.g. to coincide with Christmas). This means that £156 can be paid as a tax-free lump sum now, which would save tax of £62 for a higher rate taxpayer, plus National Insurance savings of up to £20 for the company and £16 for the employee – a total saving of £98 per person!
Note that for the purpose of this rule, ’employees’ are anyone on the payroll and any director or company secretary of the company.
The £3 allowance can be paid for each week in which some work is done from home. This includes business-related phone calls, logging on to do emails or other computer-based work, bookkeeping and even discussing business issues with your spouse or partner!
If you decide to make this £156 payment, you just need to record it in your accounts as: ‘Home working allowance for [name] for [1.1.2011 to 31.12.2011]’. No other paperwork is needed.
If you are an employee/director of more than one company, it would appear that you can claim the allowance for every employer company.
If you are already making a claim in your accounts for ‘rent of home’ or ‘use of home as office’ or similar, this is likely to include the £156 so no extra claim can be made.
You can only pay it for one year – you cannot backdate for earlier years but it does not matter which month it is paid.
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Please get in touch with your usual contact at K&H for more information.