Home Working Expenses
In the wake of the coronavirus pandemic, millions of UK sole traders, business owners and employees have been temporarily required to work from home, resulting in increased home working expenses. Due to a large number of queries we have had in this area we thought it might be useful to issue some comprehensive guidance on what expenses can and cannot be reclaimed in each case.
If you are an employee
If your employer requires you to work at home, you can – and have always been able to – claim for increased costs due to working from home, such as heating and lighting. HMRC has now said that they will consider claims in respect of employees who have been required to work from home as a result of coronavirus.
Essentially there are two methods of claiming relief for household costs in respect of employees working from home:
- Claim an HMRC approved flat rate deduction of £6/week. HMRC has said that you will not need to justify claims in line with that figure – meaning you will not need to keep receipts or prove information. The claim can be made within your 2020/21 tax return. Alternatively, employers can give you an allowance up to this amount and what they give you is free from tax. If employers pay this to you then you cannot claim the deduction within your tax return.
- Claim for your increase in actual household costs. If you believe you have higher increased costs then you can claim more, but you will need evidence of the cost increase and this can be labour intensive. Costs that would be the same, whether or not you work at home, cannot be deducted. Specifically, this includes costs such as mortgage interest, rent, council tax, water rates and often, broadband.
In addition to home running costs, if you are required to purchase office equipment (including laptops, tablets, monitors, and office supplies) to allow you to work from home, you can claim tax relief for these costs within your self-assessment tax return. If you do not complete a self-assessment tax return, a claim can be made by completing and submitting form P87.
If your employer reimburses you the actual costs of the home office purchase, then the payment is non-taxable provided there is no significant private use. In this instance you would not be able to claim a deduction within your tax return.
It should be noted that furloughed employees will not be eligible to claim for any home working costs in respect of the furlough period as it is a requirement that they do not work in that time.
If you are Self-employed
If you are self-employed you are entitled to deduct part of the running costs of your home within in your accounts.
As with employees, there are two different methods for claiming relief for household costs for self-employed persons working from home, although they operate slightly differently:
- Claim an HMRC approved flat rate deduction based on the number of hours you work from home on average per month. Again, you would not need to justify claims in line with a flat rate deduction so you will not need to keep receipts. The amounts that can be claimed are as follows:
|Hours of business use per month||Flat rate per month|
|25 – 50||£10.00|
|51 – 100||£18.00|
- Claim for a proportion of actual household costs. If you believe your costs are higher than the flat rate then you can claim more, but you will need evidence of these costs and this can be labour intensive. You can claim a proportion of the following expenses as allowable deductions:
- Mortgage interest
- Council tax
- Water rates
- Telephone and broadband
These costs would need to be apportioned between the business and private elements on a fair and reasonable basis. We have a standard template which can help you keep track of these expenses and assist with the calculation.
Please do get in touch with a member of our team if you would like any further guidance on home working expenses.