Over the past few years, working from home has become increasingly popular. With the current situation of the pandemic forcing many employees to work from home, we are likely to see an increase in people making this transition from office-based work to home-based work.
While working from home has its advantages, it also comes with its challenges, especially when it comes to expenses. Working from home means that you are using more electricity, heating, and other resources that you wouldn’t use if you were working in an office.
In this article, we will take an in-depth look at how you can claim tax relief for expenses incurred while working from home. We will look at allowable expenses, how to claim tax relief for additional costs, and what expenses you can claim for.
Not all home working expenses are allowable expenses. To claim tax relief, you must be able to show that you have incurred additional expenses because you are working from home. There are two types of expenses, and to claim them, you must first understand what they are:
- Fixed costs: These are costs that are incurred regardless of whether you are working from home or not. Examples of fixed costs include mortgage or rent payments, council tax, and water rates. These cannot be claimed as allowable expenses.
- Additional costs: These are expenses that are directly related to your work, such as electricity, heating, and broadband. You can claim tax relief for some of these expenses.
How to Claim Tax Relief for Additional Costs:
To claim tax relief for additional costs, you must be able to show that you have paid or incurred these costs because of your work. You can claim tax relief for the additional costs of:
If you need to buy or replace small items of office equipment, such as a printer, scanner, and computer equipment, you can claim the full cost of these items when you buy them.
If you use your home as a place of work, you may be able to claim a proportion of your utility bills as a cost of doing business. You may be able to claim a proportion of your heating, lighting, and electricity bills.
The amount you can claim will depend on the size of your home and the percentage of time you use it for business purposes. You can calculate the amount you can claim by taking a percentage of your total utility bills.
You may be able to claim some or all of the broadband costs if you use the broadband for work purposes. If you use the broadband for both business and personal use, you can only claim for the costs that relate to your business use.
Home Phone Expenses:
If you use your home phone for business purposes, you can claim a portion of the cost. You can claim the percentage of the cost that relates to your business use.
Mobile Phone Expenses:
If you use your mobile phone for work purposes, you can claim a portion of the cost. You can claim the percentage of the cost that relates to your business use.
Postage and Stationery:
You can claim the cost of postage and stationery that you use for your business.
Note: It is crucial to keep a record of all expenses and keep the receipts so that you can produce them as evidence in case of an audit.
What Expenses Can You Claim For?
Here are some of the expenses that you can claim when working from home:
You can claim the additional cost of having a broadband connection at home, but only the cost that is related to your work. For example, if you use your broadband for work 50% of the time, you can claim 50% of the cost.
Electricity and Heating:
If you’re working from home, you’re likely using more electricity and heating. Keep track of the additional cost and claim for it. You can calculate the amount you can claim by estimating the percentage of your home’s floor space that is used for work.
If you need to purchase supplies such as paper, ink, or a new printer, you can claim for these expenses.
If you use your mobile phone for work purposes, you can also claim part of the cost.
If you need to purchase furniture for your home office, you can claim for it, but only if it is solely used for work purposes.
Working from home can be beneficial to both employers and employees. But it is essential to remember that working from home can also lead to additional expenses. The good news is that you can claim tax relief for some of these expenses.
Remember, only additional costs incurred wholly, necessarily and exclusively for the purpose of carrying out your work are allowable expenses. So, it’s essential to keep a record of your expenses and ensure that you are claiming for the right expenses.
By taking these steps, you could save yourself money and make working from home more affordable.