Last Updated on October 30, 2024 by admin
The advanced technology has made it very common for people to work remotely. With remote work gaining popularity, a growing number of people are now able to create an office space for themselves in their homes.
This work setup is very advantageous because one can work without feeling tied down to an office, but it does come at some price. However, you can claim certain costs when you work from home, helping to lessen the monetary strain and answer the question, How much can I claim for working from home?
This article will highlight the main expenses that can be claimed when working from home.
What are expenses?
Expenses are costs incurred by individuals or businesses in the process of earning income or running operations. They can be categorized into various types, depending on their nature and purpose.
Expenses categories may include operating, personal, capital, business, variable, and fixed expenses. Understanding and managing expenses is crucial for budgeting, financial planning, and tax purposes.
What expenses can be claimed while working from home?
Individuals may be eligible to claim tax relief if they are required to work from home due to circumstances such as:
- The necessity of residing a considerable distance from their workplace.
- The absence of a physical office provided by their employer.
Exclusions from tax relief claims
Tax relief cannot be claimed by those who opt to work from home voluntarily. This includes situations where:
- The employment agreement permits remote work either partially or entirely.
- An office exists, but access is occasionally restricted due to capacity issues.
Utility bills: If you tend to use utilities like electricity, gas, or internet for work, you may be entitled to claim a part of these expenses. For this, you will have to find out what fraction of your total utility bill was incurred due to working from home and maintain the findings.
Office equipment and supplies: Did you buy a new desk, perhaps a new chair? Or did you buy a computer or a printer but only for work? The cost of such items can be claimed, on the condition that they are exclusively used for business purposes.
Cost of use and maintenance of mobile phones and Internet connectivity services: In the current world of business where almost everything is done through technology, having a good Internet service and a telephone has become increasingly important to reach and work with coworkers or clients. Part of your monthly internet and telephone costs can also be reimbursed as long as they are used for work purposes.
Home office repairs and maintenance: Any expenses incurred in fixing or doing some routine repairs that include but are not limited to painting and installing new floors in the office can also be claimed. However, it is important to note that the repairs should be made to the area that is specifically designated as the office space in the house and not for any other personal use.
Tax relief on some expenses: To qualify, it is required that the applicant’s residence is also the place of carrying out work activities and that there is a specific working area within the residence. Expenses that can be incurred are costs for heating and lighting, rates for water that is charged on a meter, phone calls made for business purposes, and internet connection usage. This relief can be claimed either in the form of a standard method of computing expenses, that is, £6 a week, or by incurring the actual costs and presenting the burden of proof.
What expenses can’t be claimed while working from home?
When working from home, there are certain expenses you generally can’t claim as deductions.
These expenses are:
- Household items such as tea, lunch, or general household supplies that you will need.
- School fees and also educational costs related to your children such as a subscription to online learning.
- Personal use items: Expenses that are for both personal and business purposes such as rent.
- Employer-provided equipment: Any equipment or items provided by your employer.
- Rent or mortgage payment: You can’t claim the cost of your rent or mortgage even if you use it for your office space.
How do I calculate my working-from-home tax expenses in the UK?
The calculation of tax expenses related to working from home varies depending on whether one is self-employed or an employee.
For self-employed individuals
You have the option to choose between the simplified expenses method and the actual costs method:
Simplified expenses method:
This approach utilises a fixed rate determined by the number of hours worked from home each month.
Rates:
- 25 to 50 hours: £10 per month
- 51 to 100 hours: £18 per month
- 101 hours or more: £26 per month
If you engage in remote work for 40 hours for 10 months and 60 hours for 2 months, you may be eligible to claim £136, calculated as follows: (10 months x £10) + (2 months x £18).
For the actual costs method, determine the percentage of your home utilised for business purposes and apply that ratio to your overall home expenses, which may include mortgage interest, rent, and utilities. For instance, if your home office occupies 10% of your residence and your total home expenses amount to £10,000, you would be able to claim £1,000, representing 10% of £10,000.
Regarding employees, those who work from home can seek tax relief for any additional household expenses incurred. This encompasses:
Flat rate: A claim of £6 per week is permissible without the necessity of providing proof of extra costs.
Exact costs: You may claim the precise amount spent, provided you retain receipts and bills as documentation.
For example, if you work from home and face additional expenses of £6 weekly, you can claim tax relief on this figure. Assuming you are subject to the basic tax rate of 20%, you would receive £1.20 per week in tax relief, calculated as 20%.
Keeping track of all your expenses is crucial, whether you’re self-employed or in employment. It makes it easier for you to support your claims with the required evidence and mitigates any problems associated with an audit by HM Revenue and Customs (HMRC) at a later date. Maintain in a safe place, preferably electronic, copies of your invoices, receipts as well as bills for easy retrieval.
In case you are not certain about what type of expenses can be claimed or not sure how to claim, it is advisable to consult a certified accountant or a tax professional. There are ways to optimise considerations of relevant expenses. They also help avoid mistakes that may be regrettable and/or cause significant penalties and or legal issues.
FAQs
Q: How much can I claim for working from home?
Ans: In the UK, the extent of the working-from-home allowance claim depends on the individual’s method of operation, be it self-employment or employment. Other factors are the claims policies and practices.
For self-employed individuals: You can choose between the simplified expenses method and the actual costs method. The simplified expenses method utilises a fixed rate determined by the monthly hours worked from home.
Rates:
- 25 to 50 hours: £10 per month
- 51 to 100 hours: £18 per month
- 101 hours or more: £26 per month
Q: How to claim tax relief for working from home?
Ans: Gather information: Collect all necessary information, such as the number of hours worked from home, receipts, and bills.
Choose the method: Decide whether to use the flat rate or actual costs method.
Submit your claim: Use the HMRC online service for employees and Self-Assessment for self-employed.
Q: Can I claim an allowance for working from home?
Ans: Yes, you may be able to claim an allowance or tax relief for working from home, but it depends on your specific situation and location.
Q: Can I claim anything for working from home?
Ans: Yes, you might be able to claim certain allowances or tax relief for working from home, but it depends on your specific situation and location. If you’re an employee required to work from home, you may be eligible to claim tax relief for additional household costs like electricity, heating, and internet used for work purposes.
For self-employed individuals, there are more options to claim deductions for home office expenses, but these must be directly related to your business activities.
Q: Can I claim relief for internet working from home?
Ans: You can claim tax relief for additional household costs if you have to work from home. This includes expenses like electricity, heating, and business phone calls. However, you cannot claim your entire internet bill if you use it for both personal and work purposes.
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