Homeworking Expense Relief Changes Post-April 2026

From 6 April 2026, employees (including directors) can no longer claim a deduction from earnings for unreimbursed additional household expenses incurred while working from home.  The new ITEPA 2003, s 360B prevents deductions under s 336 for household expenses. See EIM32759 – Other Expenses: Home: Working From Home: Treatment From 6 April 2026 Onwards. This represents a significant change: the employee relief route is abolished entirely for non-reimbursed costs.

However, the employer exemption under ITEPA 2003, s 316A remains fully operative as per the page mentioned at EIM32759. Employers can continue to pay or reimburse the £6 per week flat rate (or actual additional costs with evidence) free of income tax and NICs where there is an objective requirement for the employee to work from home. The critical distinction is that relief now exists only through employer reimbursement, not employee claims.

Your specific scenario – directors without business premises: 

Your directors appear to satisfy the objective requirement test. Where no business premises exist and directors work solely from home because the company has no office, HMRC historically accepted such arrangements as working from home by necessity rather than choice. The examples in EIM32790 confirm that employees who are recruited specifically to work from home because the employer lacks office space qualify for relief.

Directors’ loan account credits:

The legislation refers to payments that “reimburse” expenses. While the statute does not explicitly require physical cash payment, HMRC’s guidance emphasises that s 316A provides an exemption for “employer payments”. Crediting a director’s loan account is a recognised form of remuneration that discharges the company’s liability to the director. Provided the credit represents reimbursement of actual additional household costs incurred, it should qualify for the s 316A exemption. The substance is that the company is meeting the expense – the mechanism (cash payment vs DLA credit) should not defeat the relief.

Absence of written employment contracts:

The s 316A exemption requires “homeworking arrangements” between employee and employer. These arrangements do not need to be in writing. What matters is that both parties understand the arrangements and the employee works at home regularly under them. The factual position – no business premises, directors working solely from home – evidences the necessary arrangements even without formal contracts. HMRC accepts that arrangements can be informal provided there is regularity and mutual understanding.

Implementation from 6 April 2026:

Continue paying or crediting £6 per week per director to their DLA. Ensure you maintain records demonstrating: (1) the company has no business premises; (2) directors work regularly from home; and (3) the payments represent reimbursement of additional household costs (heating, lighting, electricity). The absence of written contracts is not fatal, but documenting the working arrangements (even retrospectively through board minutes) would strengthen the position if challenged. The key risk is HMRC arguing directors work from home by choice rather than necessity – your facts (no alternative premises) should defeat this.

Anti-avoidance considerations:

The removal of employee relief while preserving employer exemption creates an asymmetry. HMRC may scrutinise whether payments genuinely reimburse additional costs or represent disguised remuneration. The £6 per week benchmark rate provides a safe harbour. Payments above this require evidence of actual additional expenditure. For directors with significant control, ensure the reimbursement is commercially justified and documented, particularly where credited to DLA rather than paid in cash. The absence of a PAYE/NIC charge on exempt payments makes this an attractive planning opportunity, but substance must support form.

Quantification:

Each qualifying director can receive £6 per week (£312 per annum) tax and NIC-free. For example, a company with three directors, this represents £936 annual savings in employer NICs (13.8%) = £129, plus income tax savings for directors depending on their marginal rates. The relief is per individual, not divided among directors – each qualifies independently, provided they meet the conditions.

The critical action point is ensuring your clients’ companies formally adopt the reimbursement approach from 6 April 2026, as the employee claim route (previously available as a fallback) will no longer exist.

For more information, please contact us at: consultancy@vantagefeeprotect.com

Angela Robson
Senior Tax Manager