Among the self-employed, working from home has long been the norm. Some of us, though, are relatively new to it.
If WFH is going to be part of your working pattern going forward, you need to know what expenses you can claim and what tax reliefs you’re entitled to.
Our handy guide will help you out.
Can I claim expenses for working from home?
The short answer is yes. If you work from home, various associated with this– or at least a proportion of them – are tax deductible.
Think about it – office-based workers don’t have to pay towards heating the building or buy their own pens. Why should running your home office be any different?
So – what can you claim?
If you’re self-employed…
Self-employed accounting can be confusing. But it’s important to know that anyone who is self-employed can write off various expenses associated with running their solo enterprise or small business – whether that’s from home or not.
This means that if something has been bought solely for business use, the cost of that item can be subtracted from the business’s overall taxable profit.
These expenses can range from transport costs including petrol and train tickets; bank charges and insurance costs; the cost of replacing uniforms and small tools; staff salaries and even goods for resale.
But, what about things which are specific to working from home?
WFH-specific allowances include:
1. Office furniture
A desk, office chair or lockable filing cabinet which will be used exclusively for work would all be tax-deductible. But the taxman may raise an eyebrow at a new state-of-the-art gaming chair with in-built speakers and LED lights. Unless of course, you need it to perform your job.
2. Office equipment
Printers, scanners, telephones and computer software which is strictly for work-related purposes count as allowable business expenses.
3. Office stationery
Employed workers don’t pay for the use of pens, paper and printer ink – so why should you? Any office stationery, including things like business cards, can be taken off your pre-tax profit.
4. Phone bills
You can treat phone bills as a deductible expense, but only if your calls are purely business-related. Unless you have a separate work phone, you’ll need to work out what percentage of the calls you make on your personal phone are business related and declare accordingly.
5. Utility bills
Your home office costs money to heat, so you may write off a portion of your utility bills to reflect this. With gas, electricity and metered water bills, calculate your usage by dividing your final bill by the amount of rooms in the house. So, a £1000 annual energy bill divided by six rooms would mean you can declare £166 as a working from home expense.
It’s important to know that HMRC guidelines state that you should claim items you’d ‘normally use for less than 2 years’ as allowable expenses on your year-end tax return. This includes things like stationery and a portion of your utility bills.
Things that you’ll keep for longer, such as computers and office chairs, can only be included as allowable expenses if you use cash basis accounting. Otherwise, you’ll need to treat them as capital allowances – as they’ll count as a business asset.
You should claim all expenses on your end-of-year Self-Assessment tax return – backed up by receipts, bills, invoices and any other relevant form of proof in case HMRC asks to see them. Keep meticulous records as part of your small business accounting – or get an accountant to handle it for you.
Looking for support?
If you are looking for some guidance in understanding which expenses you can claim and what tax reliefs you are entitled to, whether you are self-employed or working from home, get in touch with us today and a member of our friendly team will be on hand to help!
What are simplified expenses?
If it suits your business, you can receive a flat rate for your business expenses instead of itemising them as above.
Remember, an accountant can help – you can find accountants for freelancers, sole traders, those specialising in business partnerships and limited companies to help you make sense of your expenses.
If you’re employed…
In the UK, if you’ve been working for the same employer continuously for 26 weeks, you’re allowed to make an application for flexible working – which includes home-based working. This may soon be an employee’s right from day one, due to a potential change in the Flexible Working Bill later in 2022.
If you’re working from home as an employee, the latest government guidance states that you can claim tax relief on various household costs. Currently, this includes if you work from home for just part of the week.
The Covid-19 pandemic has been a major factor in the trend towards home working, but you don’t necessarily have to be working from home due to coronavirus to benefit from these tax reliefs.
Costs that you can claim back as a home working employee include:
- Gas bills
- Electricity bills
- Water bills
- Phone bills
- Internet (dial-up only, not broadband)
You can only claim a portion of these bills, as obviously you’ll be using your house for non-work-related purposes, too. It’s up to you to calculate how much of your overall bills go towards your home office.
Can I get the government’s flat rate for home working?
Yes – if you make a claim.
Currently, HMRC runs a scheme to make working from home expenses simple – you can claim a £6 per week flat amount from the government for home working. This reduces your income tax bill by anywhere from £62 to £140 for the year.
This initiative has been in effect since April 2020, although it may be changing soon with the start of the 2022/23 tax year. So, hurry up and claim – you can find out if you’re eligible and apply on the GOV.UK website.
What if it costs me more than £6 per week to work from home?
If you think it costs you more than £6 per week to work from home, you can claim a higher sum back for home working, but you’ll need to be prepared to show HMRC evidence of this in the form of receipts and bills.
Alternatively, your employer may give you an allowance to cover home working. This would be instead of the £6 weekly tax relief, not in addition to.
Finally, your employer may also be obliged to provide certain things which are vital to you performing your job from home. These include computers, desks, office chairs, stationery and internet. Your employer will declare these through HMRC so you don’t have to.
If you are looking for more information about claiming expenses, whether you are working from home or not, please contact us today and a member of our team will be able to help.
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