As we’re online accountants working from home, one question that nearly always comes up is: what expenses can I claim when working from home? Whether you have a self-employed business, or you are an employee (director), it’s worth checking that you’re claiming the correct amount of expenses when working from home.

what expenses can I claim when working from home?

Types of Working From Home Expenses

Self-Employed Expenses (not companies)

If you use part of the home solely for business, even for a short amount of time, you can claim a proportion of all the relevant costs listed below. Alternatively, you can claim a new fixed amount, which is £10 per month for working 25 to 50 hours per month, £18 for 51 to 100 hours pcm, or £26 for over 100 hours pcm. You can read HMRC’s guidance on that here.

Employees and Directors

Employees (including company directors) working from home can claim in a few ways. There’s a flat rate claim of £6 per week (was £4 until March 2020). Or you can claim a proportion of heating and electricity and business calls. Or directors could effectively sub-let part of their home to their company using a licence agreement. With a licence agreement, directors can claim more costs such as mortgage interest or rent.

Employees would normally claim their expenses when working from home (e.g. £6 per week) directly from their employer who should reimburse the amount claimed. If not, employees who have to work from home can claim tax relief for the costs instead. If you don’t prepare a tax return you can claim the costs on form P87 from HMRC.

Which Working From Home Expenses Can I Claim?

The fixed rate of home working expenses (e.g. £6 per week) is set at a level to cover all of your home-working expenses. So you wouldn’t be able to claim anything in addition to the fixed rate. Otherwise, here are the costs that you can include in your calculation.

Only the self-employed or licence holders can claim these costs

  • Rent or mortgage interest (not capital)
  • Council tax
  • Home insurance (if no separate business policy)
  • General repairs & maintenance (e.g. roof)
  • Telephone & broadband rental
  • Cleaning

All home workers can claim these costs

  • Electricity
  • Gas/heating
  • Business telephone calls (all)

How much of my expenses can I claim for working from home?

You probably won’t have separate business and home bills for most of the costs above. So you will need to calculate how much of each cost you can claim. You would usually calculate the claim by floor area (or rooms in use) and/or time, but it could be more appropriate to use other factors such as number of people, or proportion of business telephone calls. There are no strict rules on how to do this, because each case is different.

For example, if your business use of the home is one room out of 5 usable rooms, you could claim one fifth or 20% of the costs. If you use that room for personal reasons half of the time, you should only claim 10%. But if 20% or 10% isn’t a reasonable estimate of the use of any of those costs, you could use a better method such as hours occupied in the office compared to the whole house.

Capital Gains Tax Trap

If you claim that part of your home is used exclusively for business, the principal private residence exemption for capital gains tax will not apply to that part of the house for the time it was in business use. However, if you have a little personal use of the part of the home used for business, it will normally qualify for the exemption.

What evidence do I need to claim expenses when working from home?

If you are claiming the fixed rate expenses (e.g. £6 per week), you don’t need any evidence or workings for your costs. You should keep a note of at least once each tax year when your employer required you to work from home.

For other types of claim, you should keep your home bills and your workings safe for at least 7 years. That’s in case HMRC want to see evidence of what expenses can I claim when working from home.

Summary

It usually pays to know exactly what expenses can I claim when working from home. So that you know that you are claiming the most homeworking expenses possible. It’s usually not the flat rate, so estimate and claim your actual business use of home expenses. But be aware that it is more restrictive for employees and directors. As always, keep your workings and invoices to support the claim.

If you have any questions or comments please contact us. At CloudBook Accountants we provide proactive advice like this to our clients throughout the year. Plus it is all included in our monthly fixed fees from £20 per month. Get an instant quote from our website now.

An individual is normally exempt from capital gains tax on property sold which was the individual’s home, with neither a taxable gain or loss arising. This is certainly the case where it has been the individual’s only or main residence throughout the period it has been owned, or if owned prior to 31 March 1982, then the period since then.

However there are times when a taxable gain or loss can arise on the property. For example the profit arising on disposal may be taxable or partly taxable in any of the following situations…

  • Where the individual (both spouses/civil partners who are treated as one for these purposes) has two or more residences. In these circumstances the individual can elect within 2 years of acquiring the second property as to which property is to be treated as the only or main residence and therefore exempt from Capital Gains Tax UK. The property chosen must be a residence of the individual, i.e. it must be lived in as a home for some part of the year, although it does not have to be the main residence as a question of fact as to which property is the main residence. It is possible to change the election at any time after it is made, and can be back-dated for a period of up to 2 years to the date when the second property started to be used as a residence.
  • The property has been let out whether fully or partly. There is no problem with a lodger if they live as part of the family and individual still occupies the property but other than that, the part of the gain apportioned to the letting period is taxable but is reduced by the lower of…
    • £40,000 and
    • an amount equal to the exempt gain
  • There has been business use of the property. However, entrepreneurs’ relief may be available on this proportion of the gain and it also doesn’t apply if no part of the residence has been used exclusively for business purposes, so it’s possible that storing your golf clubs in your office may do the trick!
  • The property is bought for a short time, lived in and then sold in order to make an exempt gain. To take advantage of the exemption for a private home that the property is bought for the purposes of residence and not for making a gain. There is no fixed time period during which the home should be occupied, as it is the intention that counts. In addition if properties are bought and sold on a regular basis there is a very real danger HMRC will want to treat the repeated profits as income from a trade, subject to income tax and national insurance and not just a Capital Gain on property.
  • The garden is larger than half a hectare (approx 1.25 acres) and is out of keeping with the particular size and character of the property. In other words it more than would be needed to occupy and enjoy the property based on current living requirements, not the requirement for land as existed when the property was built.
  • The garden (whatever the size) is sold after the residence has been sold, this would then be taxable.

Periods of absence. When the property is not occupied as the taxpayer’s main home any gain that arises in those periods of absences is potentially taxable. However f some periods of absence are not chargeable, with only the excess of following periods being chargeable…

  • The last 3 years of ownership as long as the property was the only or main residence at some point prior to that;
  • Up to 3 years for any reason – such periods do not have to run continually as long as it was the only or main residence at some time before and after;
  • Where a previous residence is being sold, or the property is being prepared for occupation, up to a year (occasionally 2 years) is treated as it is were a period of residence;
  • Up to 4 years where the duties of a United Kingdom employment require the individual to work elsewhere, again as long as it was the only or main residence at some time before and after unless prevented from doing so by the work;
  • Any time when employed abroad as long as it was the only or main residence at some time before and after unless prevented from doing so by the work;
  • Periods of absence prior to 31 March 1982 are ignored in calculating the chargeable gain;
  • Where there is job-related accommodation related to employment such as minister of religion or public house tenant, you can purchase a property while working and living in that job related property, for the purpose of being your future home but not live there and that property will be exempt from Capital Gains Tax, even if you never live there, so long as the intention to do so was there until sold.

Dependent Relative Relief for pre 5th April 1988 properties. Where the property is owned on 5th April 1988 that has been continuously occupied rent free by a dependent relative since then, the property becomes exempt from Capital Gains Tax on property. This exemption ceases if there is a change of dependent relative occupier.

How We Can Help You

The Capital Gains Tax treatment of the sale of the family home can be complex and planning in advance can greatly assist the outcome. Please contact us for further advice.