The way we conduct business is changing, as is the way we work. More and more people are working from home and even if you have to go into an office occasionally, many occupations now require some remote working. In some cases, you can actually claim expenses for working from home. This depends on whether you are employed or self-employed – the terms are stipulated by HMRC and differ for sole traders and limited companies. Generally, it is only self-employed or limited companies that can write off their home offices. Self-employed people include freelancers, small business owners, partners or independent contractors.
Here is what you should look out for when considering tax relief when working from your home.
What am I allowed to write off?
When writing off expenses the cost of these expenditures will be taken off your annual profits in order to reduce the amount of VAT you owe. Check out this Add VAT Calculator | Remove VAT Calculator to work out how much VAT you are paying, how much you should be charging your clients, and how much you may owe or be owed at the end of the tax year.
So, in order to write off the costs of working from home, you should be aware of exactly which expenses you can actually deduct. Some examples are as follows: Utility bills (gas, electric, water), home contents and buildings insurance, telephone, internet, and mobile phone bills, repair costs, office equipment and furniture. Find out more from the government website.
How to deduct expenses?
To claim tax relief on your home office expenses you will need to fill out the self-assessment tax return forms either online or on paper. If you are a limited company then you will generally have to fill out a company tax return. This is done annually so it is a good idea to keep detailed records of all your expenses throughout the year to help you when it comes to filling out the forms and also keep these records in case of any audits by HMRC.
If two or more people share office space at home, then they cannot both claim the full amount for the space but instead, they must divide the allowable expenses between them. Although, they may be able to claim higher relief for utilities and bills, depending on usage.
Coronavirus: Tax relief for working from home
From April 6th, 2020, employers were able to pay their employees up to £6 a week tax-free to cover additional costs if they have had to work from home in order to prevent the spread of the virus. IF you have not received this extra payment from your employer then you can apple to receive this tax relief directly from the HMRC. You can do this via the online portal and once it has been approved then your employee tax code will be adjusted to cover the payment. The amount owed will depend on how much tax you usually pay.