You receive an important email from a client, at the same moment your child shouts out that their Zoom lesson has frozen… Five frustrating minutes later you return to your desk to find your cat sitting on your keyboard!
Remember when working from home sounded like a sneaky day off?
The harsh reality of juggling business and domestic life is being experienced across the country during the coronavirus pandemic. Even when things get back to something close to normal, remote working is here to stay, as companies have found they don’t need everyone to operate from expensive offices.
“The good news is that there are some real benefits when running your business from home,” says Joanne Colman from One Click Accountant.
“Aside from the obvious financial savings on petrol and train fares, people are saving time by not commuting to and from work. Not everyone is aware that there are also some tax advantages available to remote workers.”
So what can you claim for?
Can I rent my home office?
“If you operate as a limited company, you might be able to rent your home office to your business and claim it as a flat-rate expense,” explains Joanne.
“If you are eligible, you could claim up to £312 a year.
“Please be aware that if you do rent out your office to your business, it will be classed as taxable income for the director.”
Is there tax relief on office equipment?
“During the lockdown the Government encouraged people to work from home wherever possible, which meant many staff had to buy home office equipment with the employer reimbursing the cost,” says Joanne.
“To support businesses, the Treasury created a new exemption to make these reimbursements exempt from tax and National Insurance contributions.”
To be eligible, purchases must meet two conditions:
- They are for the sole purpose of working from home as a result of the coronavirus outbreak
- the equipment would have been exempt from income tax if it had been provided directly to the employee by the employer.
This exemption is only available until the end of the tax year 2020-21.
“It is also worth mentioning that you can claim tax relief via self-assessment, or P87, for expenses up to £2,500.”
What about electricity and heating costs?
“From April 2020, companies have been able to pay staff up to £6 a week tax-free to cover the additional costs of working from home,” Joanne continues.
“If employees have not received the working from home expenses payment from their employer, they can apply for tax relief from HMRC“Joanne Colman, One Click Accountant
Eligible taxpayers can claim tax relief based on their tax rate. For example, if a worker pays the 20% basic rate and claims tax relief on £6 a week, they receive £1.20 a week in tax relief (20% of £6 a week) towards the cost of their household bills.
Higher rate taxpayers would receive £2.40 a week (40% of £6 a week). Over a year, this could mean taxpayers can reduce the tax they pay by £62.40 or £124.80 respectively.
Can I claim internet and telephone bills?
“Claiming internet costs is tricky as it must be in the name of your limited company and cannot include personal use,” warns Joanne.
“However, if you work from home and have a rental agreement with your business, this expense can be part of that rental calculation.”
“If you have a separate broadband connection which is solely used by your home office, you can claim all the internet costs for that line”Joanne Colman, One Click Accountant
“When it comes to mobile phones, your contract must be between your company and the provider.”
“This allows you to claim full tax relief on the cost of the phone and its use. Any personal calls are viewed as a tax-free benefit in kind.”
“Whether working from home is a long-term measure or temporary arrangement, it is well worth finding out if you can claim tax relief on your expenses,” concludes Joanne.
“Although some benefits might appear small, the total amount can soon add up when you take into account all your other available benefits.”
If you have a burning question about the tax benefits of working from home: