Home office expenses – Claim & save what you are owed
Over the last few years the number of people working from home has risen rapidly. In previous years, the rise was due in part to the number of people choosing to become self-employed, but digitisation has also opened opportunities for home-working. In 2020 and 2021 there was another marked increase in the number of people working from home, mostly due to new restrictions brought on by the pandemic, forcing people to work from home.
Working from home may have many benefits, but there are a lot of costs involved too. You may have needed to invest in a workspace with a desk and office chair, or you may have spent money on a laptop and faster broadband to keep up with the demands of work. Some people working from home even go as far as to renovate their homes to make them more appropriate for work. Utility bills have also likely gone up as you use more electricity, water, and heating staying in the whole day. All of these changes and purchases can set you back and make you forget all the benefits of working from home.
Despite home-working becoming so popular, many people are still not aware that they can claim money back on certain expenses. You may be entitled to money back on some of your business expenses as long as you have paid tax during the period you are claiming for. Knowing what you are entitled to and how to claim it could help you save money and get back what is rightfully yours. This applies to people running their own business as well as those employed by a company who were forced to work at home during lockdown.
Who can claim home office expenses?
Almost anyone can claim back money on home office expenses. There are some restrictions on what qualifies as a valid business expense, and there are a few requirement from you if you want to make a claim:
You cannot be employed and working from home voluntarily – if your work has made provision for you to work from another site then you cannot claim for expenses working from home
You must have paid tax over the year in which you are claiming expenses from. Claims for expenses are returned as tax deductions, therefore you need to have made tax payments to qualify
You can claim in different ways if you are self-employed, a sole trader, a limited company, or an employee
What expenses can I claim money back on?
If you own your business or are self-employed then you can show that something you have paid for is being used for business purposes, then you can probably claim expenses on it. This also goes for things like certain bills, including rent in some cases. Although most items need to be for sole business use, there are some exceptions. Your gas and electric, water, rent, or mortgage can all be partially claimed on if you can show that your business is using those expenses. For example, if you run your business out of one room in your three-bed house, you can claim back money on that room. Keep in mind, however, that the room needs to be used primarily for business and can’t be a living area that happens to house your desk.
If you are an employee, then the rules are a little different. Unlike the almost unlimited claims that can be made by business owners, employees are limited to making a claim for a fixed amount from HMRC in tax returns. If you can show that you had to work from home, then you can claim tax relief because of any expenses incurred.
Generally, people will claim back on:
Equipment such as laptops, printers, and business phones
Bills for electricity and broadband
Rent or mortgage interest
Business furnishings including storage
What is Working-from-Home tax relief?
Working from home tax relief is money back from your tax payments through HMRC. If you have used your own money for business expenses then you can claim for tax relief. Be aware, however, that if you are employed the expense you claim tax relief on must be an expense that is used solely for business purposes. Rent, broadband, and other bills do not qualify.
Under this plan, HMRC allows employed individuals to claim back money via a tax deduction to help with costs that their company won’t pay towards the expenses. This means that if your employer has covered the cost of your expense already or if they have given you an alternative to the expense then you will not be able to claim. So if you have been offered a desk at work and a laptop but choose to work from home and prefer to buy a newer model laptop, then you will not be able to make any tax relief claims.
Anything you claim tax relief for needs to be used for business purposes only, but certain expenses that must be covered by your business can’t be claimed on. If your work requires you to wear personal protective equipment or a specific uniform, then they are responsible for either providing these items or reimbursing you the cost of items you have bought to their specifications.
How much can I get?
How much you can claim for depends on if you are an employee or running your own business.
If you run your own business, then you will need to claim tax deductions on your expenses. This means your tax deduction will be variable based on what you have spent and how much tax you are paying.
It is important to remember that if you have not paid tax then you cannot claim on any expenses. For example, new businesses that have not yet reached the tax threshold for taxable earnings will not be taxed and therefore cannot claim money back from HMRC. HMRC also allows for the first £1, 000 of income from self-employment to be tax free as a “trading allowance”.
If you are an employee then tax relief is calculated on a sliding scale based on your tax rate.
Currently, personal allowance is set to £12, 570. This is the amount you can earn before you are charged tax. After you have reached this threshold, there are three tax bands:
Up to £12, 570
£12, 751 to £50, 270
£50, 271 to £150, 000
Over £150, 000
HMRC is offering tax relief at the same percentage of your tax rate to a maximum of £6 per week. This means that if you are claiming for £5 a week in expenses, you will receive £1 per week extra to cover the taxable cost. If you are in the additional rate, then you would receive £2.25. You won’t need to keep any receipts for these expenses, but you need to be able to explain what they were for.
If you feel that £6 a week does not cover your expenses, then you can claim for more, but you will need to keep your receipts, bills, contracts, or other paperwork proving the expense.
The Working-from-home tax relief scheme for 2020-2022
During 2020, HMRC recognised that most people were being forced to work from home and because of this were spending more money on business expenses. For this reason the tax relief amount rose from the previous £4 a week to £6, as mentioned above.
In addition, HMRC changed the rules governing how much an individual could claim. Previously, you would claim based on exactly how much you spent on business expenses each month. But over the 2020/2021 and 2021/2022 fiscal years, HMRC is allowing you to claim tax relief for the full year – even if you only worked at home for a day. This applies if you have had to work from home specifically because of the COVID-19 pandemic.
You will need to use the government website to make your claim and will need to have the dates you worked from home as well as the expenses you incurred for those days working at home. Where previously you would need to make multiple small claims, you can now claim for the full year, presumably to save HMRC the processing costs of all the applications they would otherwise have because of the virus.
Claiming when you own your business
For those who own their own business, the working-from-home tax relief scheme, but you can claim for above the £6 flat rate.