In the wake of the COVID-19 pandemic, millions of people in the UK have been forced to work from home. While this may have been a temporary measure for some, others have found themselves in a more permanent work-from-home situation. If you’re one of these people, you may be wondering what work-from-home expenses are allowable for tax purposes in the UK. This article will explore this topic in detail, including what expenses are allowable, how to calculate them, and what records you need to keep.
Allowable Work from Home Expenses
If you’re self-employed or an employee who works from home, you can claim tax relief on certain expenses. These expenses are allowable if they are incurred wholly, exclusively, and necessarily for business purposes. The following are some of the expenses you can claim tax relief on:
1. Office Equipment
If you need to purchase office equipment to work from home, you can claim tax relief on the cost of the equipment. This includes items such as computers, printers, and office furniture. You can either claim the full cost of the equipment in the year of purchase or claim capital allowances over a number of years.
2. Broadband and Phone Bills
If you use your home broadband and phone for work purposes, you can claim tax relief on the cost of the bills. You can claim the actual cost of the bills or a proportion of the bills based on the amount of business use.
3. Heating, Lighting, and Water
If you work from home, you can claim tax relief on the cost of heating, lighting, and water. You can claim a proportion of the total cost based on the amount of business use.
4. Council Tax
If you work from home, you may be able to claim tax relief on a proportion of your council tax bill. You can claim a proportion based on the number of rooms you use for business purposes.
5. Mortgage Interest and Rent
If you’re self-employed and work from home, you can claim tax relief on a proportion of your mortgage interest or rent. You can claim a proportion based on the number of rooms you use for business purposes.
6. Insurance
If you need to purchase insurance to work from home, you can claim tax relief on the cost of the insurance. This includes home insurance, contents insurance, and liability insurance.
7. Cleaning and Maintenance
If you need to pay for cleaning or maintenance of your home office, you can claim tax relief on the cost of these services. You can claim a proportion of the total cost based on the amount of business use.
How to Calculate Your Allowable Work from Home Expenses
To calculate your allowable work from home expenses, you need to work out the proportion of the total cost that is attributable to business use. This can be done in a number of ways, including:
- Actual costs: You can claim the actual costs of your allowable expenses. For example, if your broadband and phone bill for the year is £600 and you use it for business purposes 50% of the time, you can claim £300 as an allowable expense.
- Fixed rate: If you don’t want to keep detailed records of your expenses, you can use a fixed rate of £6 per week to cover your expenses for heating, lighting, and water. This rate is for each week that you work from home, and you can claim it without needing to provide any evidence of your actual expenses.
- Simplified expenses: If you’re self-employed and work from home, you can use simplified expenses to claim tax relief on your allowable expenses. This is a flat rate method that allows you to claim a set amount for your expenses based on the number of hours you work from home each month.
What Records You Need to Keep
To claim tax relief on your allowable work from home expenses, you need to keep records of your expenses and the business use of your home. This includes:
- Receipts and invoices for your expenses
- Records of the hours you work from home
- The number of rooms you use for business purposes
- Evidence of your business use of your home, such as a dedicated workspace
It’s important to keep these records for at least five years after the end of the tax year to which they relate.
Conclusion
Working from home has become more common than ever before, and it’s important to understand what expenses are allowable for tax purposes in the UK. By claiming tax relief on your allowable work from home expenses, you can reduce your tax bill and keep more of your hard-earned money. Just remember to keep detailed records of your expenses and business use of your home to ensure that your claims are accurate and compliant with HMRC regulations.
FAQs
Can I claim tax relief on the cost of my home internet?
- Yes, you can claim tax relief on the cost of your home internet if you use it for work purposes.
Can I claim tax relief on the cost of my home insurance?
- Yes, you can claim tax relief on the cost of your home insurance if you use it for work purposes.
Can I claim tax relief on the cost of my daily commute to and from my home office?
- No, you cannot claim tax relief on the cost of your daily commute to and from your home office, as this is considered to be a personal expense.
How do I claim tax relief on my allowable work from home expenses?
- You can claim tax relief on your allowable work from home expenses by completing a self-assessment tax return or by contacting HMRC directly.
Can I claim tax relief on the cost of my home office renovation?
- No, you cannot claim tax relief on the cost of renovating your home office, as this is considered to be a capital expense. However, you may be able to claim capital allowances on the cost of any equipment you purchase for your home office.