Working from home has become a common part of daily life, but what tax reliefs are available for those who do?

Only expenses that wholly and exclusively relate to business purposes can be claimed in full, according to the legislation that underpins the use of home guidelines. Meanwhile, expenses that are incurred for both personal and business use may be claimed if it is possible to identify the specific proportion of the expense that relates only to the business. If the expense cannot be split then no amount can be claimed.

What can be claimed as a use of home expense varies depending if you are a director of a limited company, or are self-employed. These will be discussed below..

Director of a Limited Company

When you are a director of a limited company, one of the options available to you is to claim a flat rate of £6 per week use of home. This can be claimed by each director of the company without requiring the need to provide evidence to back up your claim.

Alternatively, you could claim a proportion of the household expenses. However, these costs may have to be justified to HMRC and the claim should be calculated on a reasonable basis and not be excessive.

One method that can be used is to estimate the proportion of your home used for business (square footage or total number of rooms excluding bathrooms, kitchens and hallways) and to then claim back the proportion of allowable expenses. Gas and electricity are examples of allowable expenses. However, directors are not able to claim back any portion of their rent, mortgage interest or council tax as these costs would have to be paid if they were working from home or not.

Working out use of home in this way can often be a lot more work, but can sometimes result in a higher use of home claim.

Self-employed

As a self-employed individual, there is a flat rate option available if you work 25 hours or more a month from home. This means that you do not have to go to the effort of trying to work out the proportion split of business and personal use of your home.

25 to 50 hours – £10 per month
51 to 100 hours – £18 per month
101 or more hours – £26 per month

It is worth noting that the flat rate use of home does not include telephone or internet expenses. The business proportion of these bills can be claimed separately.

As with directors of limited companies, there is also the option to claim a proportion on your home expenses. However, unlike directors of limited companies, sole traders are able to claim a portion of their council tax, rent or mortgage interest.

If you would like to ensure that you are being as tax efficient as possible, talk to us about how we can help ensure that this is the case.