Working from home and Tax – can you claim for anything?

Working from home and Tax – can you claim for anything?

Since COVID-19 walked into our lives early last year, working from home has become the norm for a huge percentage of the working population. Whether you call it working from home, or working remotely, what was once the domain of the self-employed is now something that most households have taken on board.  The question for many is, can I claim for any expenses if I’m employed and not self employed?

It depends …

Depending on the work you do, you might be able to claim expenses back for using your home as an office, either by claiming for office equipment like computers and furniture or even renting part of your home to your company. HMRC rules are, however, complex.

Let’s break it down, so you can start to figure out what is, and isn’t, allowable. There are different rules for expenses if you are employed, self-employed or running a Limited company.

One of the benefits of running your own business is that you can choose who you work for and where you work from. If you use a room in your home as office space for running your business, you may be entitled to claim certain costs as a business expense.

As always, there are rules: you must be able to prove that you regularly spend time doing your job in this office space, so you can’t just use your home office for a small bit of administration while the majority of your work is done on-site or at client offices.

Purchases of equipment necessary and essential for your professional duties will receive tax relief. You may also claim reasonable relief towards the cost of equipping/furnishing an office (for example chairs or bookcases).

Limited Companies

If you’re a limited company, you can claim home office expenses in two ways; using HMRC’s flat rate amount or creating a rental agreement between you and your limited company. If you decide to go down the ‘rental agreement’ route you will need to account for this on your self assessment return. Please also note that it can affect your property value (and payable tax) when you come to sell your property. It makes sense to discuss this with a professional and figure out the best way forward for you.

Can you claim for multiple rooms?

Yes, but you’ll need to provide a very good reason for using more than one room for business purposes and evidence that the private use of this space is secondary to the business use. A legitimate situation might be a photography studio with an office and a dark room – remember that if you sell the property, Capital Gains Tax may be payable.

Use of the Internet when working from home

In order for expenses to fall within the “wholly and necessarily” rules, the internet connection must be purchased in the name of your limited company. You normally can’t claim any internet costs as this will include personal use. However, if you work at home and have a rental agreement with your business, this expense can be part of the rental calculation.

The exception to this is if there is a separate broadband line that runs into the office part of your home to provide internet access solely to that area – only then can you claim all of the internet costs for the separate line.

How do I claim for business mobile telephone calls?

To claim full relief on your mobile telephone bills, you’ll need to ensure that a contract is set up between your company and the service provider. This way you can gain full tax relief on the cost of the phone and its use. Any personal calls on the mobile are treated as a tax-free benefit in kind, so are, as a consequence an allowable business expense and will encounter no tax – nor need reporting on your P11D. The best idea is to keep your personal and business phones separate.

Sole Trader Expenses

What about home office expenses if I’m a Sole Trader?

If you’re a sole trader, then the rules are different – you have two choices, you can choose to claim simplified expenses for the self-employed or you can work out your actual costs by calculating the proportion of personal and business use for your home. That is, the proportion of utility bill expenses incurred by your business. The government’s website www.gov.uk has a simplified expenses checker to help you decide which method is best for you.

Simplified expenses for the self-employed mean you claim a flat rate for your allowable expenses based on the number of hours you work from home each month. You’ll need to work a minimum of 25 hours a month from home to qualify. If you use simplified expenses, then don’t forget you can also claim the business proportion of your telephone or internet expenses as these are not included in the flat rate allowance.

Claiming Expenses if You’re an Employee

Of course, you don’t have to be self-employed or run your own business to work from home. Many employees work from home at least some of the time – indeed the Coronavirus pandemic has seen this increase dramatically. You are still able to claim the £6 per week (£26 a month) to cover your additional costs if you have to work from home, either from your employer (provided they are willing to pay you) or directly from HMRC.

If you’ve agreed with your employer to work at home voluntarily, or you choose to work at home, you CANNOT claim tax relief on the bills you have to pay.

Conclusion

There are expenses to be claimed, but it’s complicated and what you claim today may have long term implications that you can’t foresee. Working with an accountant is essential if you want to avoid mistakes down the road. Your starting point is pretty simple. Ask yourself this; are these expenses genuinely for business purposes? And can I prove it?

Not sure? Get in touch today and we can help you navigate HRMC rules so you don’t get stung later on.

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