2nd March 2021
With remote working becoming the norm and with the nature of contracting, there is a good chance that you work from home to some extent. And why wouldn’t you? Avoiding the dreaded morning commute alone is a good enough reason to fire up your laptop in the living room.
But can you claim the cost of using your home as the office, and if you can, how much and what is allowed?
The answer to the first part of the question is yes; the second part is a bit more complicated. Let us explain: There are two ways of going about claiming for expenses, a standard no questions asked weekly allowance or a detailed calculation more suited for those that work regular hours from home.
The standard allowance
The more straightforward option. If you do occasional work from home HMRC will let you claim £6 per week or £26 per month to cover the costs of using your home. The amount comes to a total of £208 tax allowable expense in your company’s annual accounts, and you don’t have to support the claim with receipts. Better yet, there is no benefit in kind implications to claiming it, so no additional personal tax due on your self-assessment return on this amount.
When would we recommend claiming the flat rate? We would recommend this option if you work from home infrequently and/or just want a simple method to apply.
The cost calculation method
If you run your business and spend the vast majority of your time working out of your home, you may want to claim the part of the actual running cost of your house. While apportioning the costs, HMRC asks that you are “fair and reasonable” however the amount depends on the type of business you operate.
Begin calculating the amount; it is best to start with the number of rooms you have in your house. If you have five rooms and use one of them for work 90% of the time, you’d divide the claimable costs (typically heating and electricity), multiply the amount by 1/5 and then by 90%.
Our friends at FreeAgent provided this handy illustration to help visualise it:
View the full image at FreeAgent
Home office expenses
Once your office in your home is selected, you may be entitled to claim certain costs as business expenses. Equipment and office furniture that is used exclusively for business purposes will receive tax relief.
It is worth keeping in mind that, in the event of an enquiry, HMRC may want to see evidence that you regularly work from your home office.
Using the internet when working from home
As we mentioned the “exclusivity” rule above, your home internet will not meet the criteria, so we suggest that you take out a broadband plan under your business name. Once the contract is in your company name, the entire bill will be claimable.
To fully comply with the rules, it is essential to make sure not to include any TV or other services as these will breach the “wholly and exclusively” business rule again and render the entire bill disallowable.
Key considerations before claiming or calculating any use of home expenses will be “Do my claims match my business activity?” and “Can I prove that what I am claiming is genuinely for business purposes?”
We hope that this guide has been helpful, and as always if you have any questions, it is best to contact a qualified accountant for guidance.
At MyAccountant, our clients have access to both an accounts assistant and a manager assigned exclusively to them to provide answers and never more than an e-mail or phone call away.
If you are interested in our services, please contact us via email@example.com or call 0800 917 9100.