Working from home, a now very common term. But what expenses can be claimed against tax?
You may have moved some patient consultations online and still carry them out from home since the pandemic, or maybe you’ve found yourself carrying out more admin and working from home.
If so, you can claim a percentage of your household costs and utility bills as business expenses. But, as usual, HMRC don’t make it simple to claim the use of home expenses; what you can and can’t claim differs if you are self-employed, own a limited company or are employed. I will give an overview of claiming office expenses depending on each situation.
HMRC states that you can only claim for the expenses that you incur “wholly and exclusively” during the everyday running of your business (or employees working from home), no matter what your situation.
Director of Limited Company
If you are a director of a limited company, this cost could be claimed as a flat rate of £6 per week (excluding business phone calls) without the need for receipts, or by working out what rooms you use for your business needs and the amount of time they’re used for this purpose. You’re also able to claim the costs of lighting and heating – this is the additional unit costs of gas and electricity consumed while a room is being used for work.
In order to work out the proportion of costs used by the business, you will need to provide us with the square meterage of the house, and the square meterage of your office space. Or, alternatively, you could work out how many rooms you have in your home, and how many of these rooms are used for the business. You then need to work out how often you use these rooms for business activities (for example, the business area only needs to have lighting for 50% of the day).
Directors (and employees) can’t claim back any proportion of rent, mortgage interest, or council tax from their companies – as these costs would have to be paid regardless of working from home or not.
If you are self-employed (not claiming expenses through a limited company) the simplified accounting method is offered by HMRC. This allows a flat rate claim for your use of home, depending on how many hours a month you spend working from home, on average, to cover your overall expense of using your home for business purposes (again no need to provide receipts);
- 25-50 hours working from home per month: £10 per month
- 51-100 hours working from home per month: £18 per month
- 101 hours or more working from home per month: £26 per month
This is, as it says on the tin, a simple and quick way of claiming some expenses, however, this figure may not be as high as your actual costs and it may be worth calculating your actual expenses. The guidance from HMRC is that this should be done on a “fair and reasonable” basis – a recommended way to calculate this is the same as the limited company above; per square meterage or number of rooms and how often you use the rooms for business. A big difference between the sole trader and limited company use of home claim is that, as a sole trader, you can claim a portion of your council tax, rent payments, or the interest part of your mortgage as an expense.
You cannot claim water expenses for any use of home claim, whether you are a sole trader or a director of a limited company.
If your team has been working at home(including if this is because of coronavirus) they may be able to claim tax relief for additional household costs for all or part of the week. However, they cannot claim tax relief if they choose to work from home. They can either claim tax relief on:
- £6 a week from 6 April 2020 (for previous tax years the rate is £4 a week) without the need to keep evidence of the extra costs
- the exact amount of extra costs they have incurred above the weekly amount but they’ll need to provide evidence such as receipts, bills or contracts
There is more information on HMRC’s website and some questions to answer to check they’re eligible. If they’re eligible they will need to get a gateway ID from HMRC (if they don’t already have one) if completing online or they can complete form P87 to claim by post.
This is just to give you an idea of what you can claim to make sure you aren’t missing out on any tax deductions; if you provide us with the information, we can do all the calculations and work out the claim for you, that is what we are here for!