Every employee who works from home is entitled to be paid a £4 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 £208 can be paid as a tax-free lump sum now, which would save tax of £83 for a higher rate taxpayer, plus National Insurance savings of up to £28 for the company and £24 for the employee – a total saving of £135 per person.
The company saves Corporation Tax of £27 per person too.
Note that for the purpose of this rule, ‘employees’ are anyone on the payroll and any director or company secretary of the company.
- The £4 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 £208 payment, you just need to record it in your accounts as: ‘Home working allowance for [name] for [from 6.4.2012 to 5.4.2013]’. 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 £208 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.