What can you claim for when working from home?

Working from home can mean incurring several costs you wouldn't otherwise have to cover, such as higher energy bills and insurance for your equipment, such as laptops, printers and other costly gear. The good news is that if you're self-employed and working from home, there are a number of remote working business-related expenses that you can claim for. These can help to reduce your tax obligations and ensure you pay the right amount. There's also relief available if you're an employee.

Five expenses you can claim when self-employed and working from home

1.Utilities

Given the recent rises in energy costs, it might be reassuring that home workers can claim a portion of their gas and electricity bills. To do this, you must calculate how much of your energy supports your working environment. So, if you operate from one room in the house, it's a case of counting how many rooms you have in your property and working out the percentage used exclusively for work purposes. For tax purposes, HMRC doesn't count a kitchen or a bathroom as a room, so if you have four other rooms in your house and work out of one, that equals 25%. You then need to work out how much time you spend working, say five days a week, 7 hours a day, to determine the amount you can claim. The calculation would be:

• £ Costs x (1/4) to calculate the costs of running that room per year
• Multiply by (5/7) to account for the number of days per week you work from home
• Multiply by (7/24) account for the number of hours per day you work from home
• = the amount you can claim.

 

2.Rent and mortgage costs

Just as business premises are tax deductible, you can claim a portion of your rent or mortgage payments if your office is also your home. The calculation will be the same as how you work out your utilities – calculate the percentage of your home that you're using exclusively for work purposes and the time you're in it, and then claim the relevant amount on your tax return. If you're renting a property, you can claim based on the total amount of rent you pay; however, when you have a mortgage, only the interest is classed as an allowable expense. 

3.Council tax

Some remote workers may be surprised to learn that council tax is also an allowable expense – or at least some of it is. As with the scenarios above, the easiest way to determine how much you can claim back is to return to the number of rooms/time spent working scenario. With England's average Band D council tax bill now exceeding £2,000 a year, it's worth remembering. 

4. Contents insurance

If you're working from home, a portion of your contents insurance - and other kinds of property-related insurance - also becomes a necessary business expense, although you can, of course, only claim for the portion of your costs linked to your work or business. However, working out the specific costs could be worthwhile if you have expensive computers, laptops, displays, printers and other equipment.

5. Broadband

Finally, it's unlikely you'll be able to run a business from home without reliable broadband, which is why it's also classed as an allowable expense by HMRC. As ever, you're only allowed to claim for broadband expenses that are directly related to your work, so if you also use it personally, you'll have to work out the proportion for business use. This will involve calculating the ratio of time spent using broadband for work compared to private use and claiming the appropriate percentage of the total costs.

Simplified expenses for the self-employed

If this sounds too complicated and time-consuming, or if your costs are quite low, you can calculate your allowable expenses using a flat rate based on the hours you work from home each month. The flat rate does not include telephone or internet expenses, so you'd have to work out the actual costs if you want to claim these.

You can only use simplified expenses if you work more than 25 hours a month from home. If you work 25-20 hours a month at home, you can claim £19 a month; for 51 to 100 hours, it's £18 a month; and for 101 hours or more, it's £26 a month.

Working from home as an employee

Working from-home tax relief is a government initiative under which you can claim additional household costs when working from home when you're employed. It is available whether you work from home full-time or part-time, although you can only claim if you have to work from home, not if you choose to. This may be the case if your employer doesn't have an office or your job requires you to live far away from the office. As is the norm with HMRC, you can only claim for expenses wholly associated with your work, such as business phone calls or gas and electricity for your work area. You can either claim a flat rate of £6 a week or, if you provide evidence of the costs incurred, such as receipts or bills, you can claim the exact amount you've spent. You'll get tax relief based on the rate at which you pay tax.

What expenses can't I claim when working from home?

Wherever you work, HMRC's rule applies that anything you claim must be wholly for business use, so it's not possible to claim personal expenses for things that you use privately, such as costs for personal phone calls. You also can't claim for expenses that don't have receipts or any expenses paid for by a partner or spouse.

Read more about working from home versus the office, and other options out there in our post: Working from home vs. working from an office - what’s best for your expenses?