In the UK, working from home can bring financial benefits in the form of tax relief, but many employees and self-employed individuals aren’t fully aware of what they can claim. Whether you’re working from home full-time or just a few days a week, there are various ways you could reduce your taxable income by claiming certain expenses. In this post, we’ll explore how tax relief works for employees and self-employed individuals working from home, and what you can claim.
Tax Relief for Employees Working from Home
If you’re an employee and your job requires you to work from home, you may be eligible for tax relief on certain expenses. This applies whether you work remotely full-time or just on certain days, under the following circumstances:
- You live far from your office and need to work from home.
- Your employer doesn’t have a physical office in the UK.
However, if your employer allows you to choose whether to work from home or the office, or if working from home is just your preference, you won’t be able to claim tax relief.
Eligible expenses for employees working from home can include:
- Business phone calls
- Gas and electricity used for your work area
You can’t claim tax relief on costs that serve dual purposes, such as rent or broadband used both for personal and work reasons. Employees can either claim a flat rate of £6 per week (starting from 6 April 2020) without needing to provide receipts, or they can claim the exact amount for additional costs, as long as they have receipts for those expenses.
The amount of tax relief you receive depends on your income tax rate. You can claim for the current tax year as well as the previous four years through HMRC’s online service. However, it’s important to note that claims for tax relief due to working from home during the COVID-19 period are not eligible.
Tax Relief for Self-Employed Individuals Working from Home
For the self-employed, including sole traders and those running limited companies, tax relief on home office expenses can be more complex. Generally, to qualify for tax relief, expenses must be incurred exclusively for business purposes. However, if you work from home, you can claim a portion of household expenses used for your business.
Common allowable expenses for self-employed individuals working from home include:
- Mortgage interest or rent
- Heating and electricity
- Broadband bills
- Council tax
- Mobile phone bills
- Magazine subscriptions (if relevant to the business)
- Contents insurance
Self-employed individuals should seek professional advice to ensure they’re claiming the correct expenses, as there are specific rules about what qualifies. Additionally, other personal allowances, such as savings interest and dividend income, can also help reduce your overall tax liability.
Conclusion
Whether you’re an employee or self-employed, working from home can offer a range of tax relief opportunities. Employees can claim a flat rate or actual expenses for certain costs, while self-employed individuals can calculate a portion of household expenses used for business. Make sure you understand what you can and cannot claim, and don’t hesitate to reach out to tax professionals for advice, especially if you’re unsure about your situation. Understanding and claiming the correct tax relief can help reduce your tax burden and save you money.
