Do you work from home some or part of the time? Current data indicates that in a typical week, 38% of workers work from home at some point, with at least 13% now working exclusively from home.
There are both pros and cons to working from home. But did you know that if you do work from home you may be eligible for tax relief?
In this article we explain the different types of tax relief available to you if you work from home, either as an employee or self-employed. We will also cover how to find out if you are eligible for either type of tax relief.
If you are employed and are completely home-based, you need to meet one of the following criteria to claim tax relief:
If you choose to work from home – for example if your employment contract allows this, or your employer has an office but it is sometimes full – you are NOT eligible for tax relief.
You can claim tax relief if all the following rules apply:
You can check your eligibility for tax relief by using the Gov UK checker here.
If you are eligible to claim tax relief, you can apply this to expenditure related to your work, for example business phone calls and gas and electricity for the area in which you work.
There are two ways to claim tax relief : either on a flat rate or analysing costs basis:
You claim a flat rate of £6 a week and do not need to keep evidence of your costs.
You work out the exact amount of extra costs you’ve incurred over and above the £6 weekly amount, and claim for these. To do this you will need to keep evidence of expenditure such as supplier contracts, bills and receipts.
For both types of tax relief, the amount you get is based on the rate at which you pay tax. So if you pay 20% tax, and claim flat rate tax relief of £6 a week, you would get £1.20 per week in tax relief.
Tax relief will normally be given to you via a change to your tax code.
You can claim tax relief if you are self-employed to cover a proportion of a wide range of fixed and variable household expenses such as:
You can find out more about these expenses on the Gov UK website
As with employed people, there are two ways of claiming tax relief : flat rate and analysing costs.
The flat rate process varies depending on whether you are a sole trader or a company director.
The flat rate amount depends on the average number of hours a month you spend running your business at home. The current rates are::
The flat rate is flexible : you do not need to do the same amount of hours each month.
If you are a company director, the flat rate works the same as for those in employment i.e. £6 per week.
If you are self-employed – whether as a sole trader or company director – you can apportion the running costs of your home on a “fair and reasonable” basis between your personal and business use. This involves working out the number of rooms in your house that you use for business purposes, and the proportion of time they are used for business purposes rather than other domestic uses.
You can check the difference between flat rate and analysing costs on the Gov UK website.
We hope that the information in this article helps you to work out if you are eligible for tax relief on home working expenses, and claim them on your next tax return or by contacting HMRC.
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