Many people are working from home at the moment. And whether you do this full time because you are self-employed or have been working from home due to COVID-19 rules and restrictions, you may be able to claim expenses for the costs that you incur.
What expenses can I claim when working from home if I’m self-employed?
If you work from home, whilst you may save money on areas such as transportation, meals out etc you will still incur several running costs linked to working from home. But if you are self-employed there are a number of allowable expenses linked to these running costs which you can claim for and deduct from your earnings to work out your taxable profit.
Allowable expenses that those who are self-employed can claim for working from home include a proportion of costs linked to:
- Heating
- Electricity
- Council tax
- Mortgage interest/rent
- Internet/telephone use
However, do bear in mind that you cannot include the full costs for these items in your expenses. You can only claim for the proportion of the cost which is linked to your business use. This is typically calculated by looking at the number of rooms that you use for business use, and the proportion of time that the space is used for business use.
You can also use the simplified expenses system if you are self-employed to calculate your allowable expenses linked to working from home. Using this process means you calculate a flat rate based on the hours that you work from home a month (rather than working out the proportion of business vs personal use linked to your bills). You can only use simplified expenses if you work for 25 hours or more a month from home.
If you are self-employed, you can also claim for other items such as stationary or office equipment which you’d normally use for less than 2 years as allowable expenses. Examples of stationary that you can claim for include:
- phone, mobile, fax and internet bills
- postage
- stationery
- printing
- printer ink and cartridges
- computer software your business uses for less than 2 years
- computer software if your business makes regular payments to renew the licence (even if you use it for more than 2 years)
What expenses can I claim when working from home due to COVID-19?
Typically, if you are employed and choose to work from home, you are not able to claim expenses or tax relief on costs incurred.
However, if you are employed and have to work from home on a regular basis, you may be able to claim some expenses back. You can also claim tax relief if you have had to work from home because of COVID-19.
If you are eligible, tax relief can be claimed on:
- gas and electricity
- metered water
- business phone calls, including dial-up internet access
Not the whole bill, but that which relates to your work.
You can claim in one of two ways:
- £6 a week from 6 April 2020 (for previous tax years the rate is £4 a week) – you will not need to keep evidence of your extra costs
- the exact amount of extra costs you’ve incurred above the weekly amount – you’ll need evidence such as receipts, bills, or contracts
The tax relief that you receive is based on the rate at which you pay tax. For example, if you pay the 20% basic rate of tax and claim tax relief on £6 a week you would get £1.20 per week in tax relief (20% of £6).
You may also be able to claim tax relief if you have had to buy substantial equipment to do your work from home.
Changing working patterns and working environments can change a businesses or individuals risk profile which can have a knock-on impact on your insurance products. Working from home for example can impact your home insurance. Get in touch with us today to discuss your business insurance needs if your circumstances have changed or you are unsure whether you have the right cover for your business. You can call us on 020 8290 9080 or email us at business@anthonyjones.com.
