What expenses can I claim when working from home?

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.

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.