Are you working or operating your business from your home? Remote work and freelancing have risen over the previous years, and many individuals may be unaware of which home office expenses are tax deductible. Understanding which expenses are allowable according to HMRC regulations is vital, and claiming them can help you reduce your tax bill.
What can I claim if I’m employed?
You may be able to claim tax relief for additional household costs if you have to work at home for all or part of the week. Such as if your job requires you to live far away from your office or your employer does not have an office.
If you choose to work from home, you cannot claim tax relief. This includes if your employment contract lets you work from home some or all of the time, you work from home because of coronavirus (COVID-19) or your employer has an office, but you cannot go there sometimes because it’s full.
You can only claim for things to do with your work, such as business phone calls, and utility bills for your work area. Things you use for both private and business use, such as rent or broadband access cannot be claimed.
You can claim either £6 per week, without needing to keep evidence of your extra costs, or the exact amount of the extra costs you have incurred above the weekly amount. If you are claiming extra costs above the weekly amount, you will need to keep evidence such as receipts, bills or contracts.
Tax relief can be claimed via HMRC’s website. The claim will update your tax code and you’ll get tax relief based on the rate at which you pay tax. It is also possible to make a retrospective claim for the previous 4 tax years.
What can I claim if I’m self-employed?
If you’re self-employed and you work from home, there are several ways that you can obtain tax relief for the costs associated with this. HMRC allow you to claim either simplified expenses using a flat rate allowance or a proportion of your actual expenses incurred.
Simplified Expenses
If you work from home for more than 25 hours per month, you can claim a flat rate allowance based on the number of hours you work from home each month. Details of the flat rate you can claim can be found on HMRC’s website. The flat rate does not include telephone or internet expenses and you can claim a proportion of these costs (see below) in addition to the flat rate allowance.
Actual Expenses
Alternatively, you can claim a proportion of your actual working from home costs. These include the following:
- Gas and electricity
- Council tax
- Mortgage interest or rent
- Internet and telephone use
In order to calculate the proportion of costs to be claimed, you will need to find a reasonable method of dividing these costs between business and personal use. HMRC generally accept floor space (e.g. the number of rooms you use for business) or the number of hours you work from home to be reasonable methods of apportionment.
Don’t forget, you can also claim expenses related to office supplies, like stationery, printer paper and ink, as long as they are used exclusively for business purposes. In addition, if you invest in equipment specifically for your home office, such as computers, desks, or printers, you may be able to deduct the costs under the Annual Investment Allowance (AIA) scheme, subject to specific HMRC guidelines.
We’ve only covered a small portion of these expenses, so we’ve put the rest into a FREE PDF download for all of you sole traders to refer back to at any time. This PDF also contains information on expenses you cannot claim:
Free PDF download of home office expenses for sole traders (October 2023)
You must keep complete and accurate accounting records for any allowable expenses, including copies of receipts/invoices.
Make sure you separate your personal and business expenses clearly. And remember, staying in the loop with the latest rules and regulations is key, but it’s always a good idea to reach out to tax professionals for guidance.
Disclaimer: The tax rates and reliefs mentioned in this blog were correct at the time of posting (October 2023) and have not been updated for any future changes in tax law or HMRC practice. The contents of this blog have been produced as a helpful reference point and the information provided should be used as a guide only. You should discuss your specific circumstances directly with us before taking any action based on the information included in this blog.
Want to know more about expenses? Click here to learn more about claiming your mileage expenses