2nd March 2021

With remote working becoming the norm, there is a good chance that you will 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 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 business’s annual accounts, and you don’t have to support the claim with receipts. This is a good option if you work from home infrequently and/or just want a simple application method.

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 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 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 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 you take out a broadband plan under your business name so the entire bill is claimable.

To fully comply with the rules, it is essential not to include any TV or other services. These will again breach the “wholly and exclusively” business rule and render the bill disallowable.

Summary

Before claiming or calculating any use of home expenses, key considerations 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 an accounts assistant and an ACCA-qualified accountant 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 info@myaccountant.co.uk or call 0800 917 9100.

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