Kirkpatrick & Hopes - Succession Planning Accountants

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Christmas gifts from the taxman!

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.

2 Responses to “Christmas gifts from the taxman!”

  1. Andrew Gray says:

    As you say Andy, you can’t claim this £208 as well as “use of home as office” (UOHAO). Note that a UOHAO claim can be substantially more than the £208 as it can be based on the business proportion of your total home running costs, incl mortgage interest and rent. One of my clients claims over £3,000 a year (tax free) by doing this.

  2. Andrew Scott says:

    Thanks for your question.
    The £150 exemption realtes to purely to employees, directors and the company secrertary. It does not cover guests

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