You’re not alone. Knowing what expenses you can and can’t claim back when working from home can be a headache for many of us, with the complexity of the issue often causing us to not claim back all the reliefs we’re entitled to.
To help shed some light on this complex issue we’ve detailed below six areas that are often at the top of mind when trying to decide upon what expenses can and can’t be claimed back. To ensure you don’t miss out on the tax reliefs you’re entitled to, keep reading.
Mortgage and Household Bills
Simply put, you cannot claim relief on your household mortgage or council tax expenses, as HMRC point out that you would be paying these expenses regardless of whether or not you worked from home.
That said, HMRC do recognise that you should receive tax relief on extra household expenses that incur as a result of you working from home; the most significant of which being the extra cost of gas and electricity to heat and light your work area.
You can claim relief on these expenses in two different ways;
1. Agreeing to HMRC’s flat rate,
2. Setting up a rental agreement between you and your company.
If you decided to claim household expenses at HMRC’s flat rate this will amount to £4.00 in tax relief per week, paid either on a monthly (£18.00) or yearly (£216.00) basis.
To make a flat rate claim from HMRC you don’t need to provide any records of your household expenses, therefore if you believe your household expenses are fairly close to this level this is a very simple, non-intrusive way of claiming back relief on what you originally had to pay out.
If, on the other had, you are spending significantly more on your business-related household expenses than £4.00 per week you will want to make sure you claim back the exact amount of relief you’re entitled to.
If you work from a desk in your spare bedroom, an easy way to work out these expenses is to first add up how long you typically work from home in this room each week (a standard example would be working Monday to Friday, 9:00-17:00), then divide your gas and electricity bills by the number of rooms in your home, with that figure being broken down so a monetary amount can emerge from the number of hours you spend working in the room each week.
Don’t Lose Your Private Residence Relief (PRR)
In this circumstance, caution must be taken to ensure you don’t lose your Private Residence Relief (PRR) when you come to dispose of your home, as can happen when you put aside one of the rooms in your home solely for business purposes, inaccessible to other members of your family.
PPR is an incredibly useful tax relief as it can significantly reduce tax on any gains made on your home, potentially to zero, therefore not losing PPR must be kept at the top of your mind when working from certain areas of your home.
Business Phone Calls and Broadband Internet
There are two ways to claim for your business phone calls; either by plucking them out from the call breakdown of your home phone line, or by having a second telephone line connected in your home purely for business use.
If your business calls are infrequent, and therefore their cost nominal, it’s usually not worth going to the effort of pulling your call breakdown apart to note down each call, and in turn claim such a small amount back. If you do have a genuine need for a second (business) phone line in your home, however, you can claim for the entire cost of this phone line, including costs paid to have it installed. This second line must be in your company’s name, and paid for via your company’s bank account.
You may also claim for your broadband internet expenses so long as no separate billing is available to determine private and business use; private use is insignificant, and, again, the contract is in your company’s name, and paid for via your company’s bank account.
Not only can you not claim any tax relief on your household insurance when you work from home, you will be quickly penalised by your insurance company if you need to make a claim from them at any point going forward, as your household policy is very unlikely to cover business risks.
If you wish to claim tax relief on certain items of office furniture the number one thing you’ll have to consider will be how significant any private use of said furniture will be; either by yourself or a member of your family.
If the combined costs of any office furniture you wish to claim tax relief on are fairly low (below £250.00 being a fair estimate), you’re unlikely to ruffle any feathers at HMRC. For higher claims, however, make sure you can justify your claim sufficiently before making it.
Claiming tax relief on clothing costs is incredibly complicated and varied, but as a general rule you must consider whether an item of clothing you wish to claim expenses on could be considered a part of your everyday (non-work) wardrobe.
When you apply this rule, suits are out of the running, as are any items of clothing that either don’t display a clear company logo, or are non-protective (and job specific); both of which you can claim for in most circumstances.
Vehicles and Travel
If you purchase a vehicle for both personal and business purposes you’re able to claim back a portion of the vehicle’s cost in tax relief appropriate to how often the vehicle will be used for purely business pursuits.
When operating your vehicle you may claim on the full travel cost incurred that are necessary in the course of doing your job. This (obviously) doesn’t include private travel, such as taking your children out on the weekends, but it also doesn’t include your commute if you occasionally work from an office.
Professional Advice on How to Claim Expenses if You Work from Home
Make sure you are claiming back all the relief you are entitled to when working from home.
Contact us to discuss your expense claims in greater detail, on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.
This blog is a general summary. It should not replace professional advice tailored to your specific circumstance.