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How to claim tax relief for working from home expenses

Are you one of the millions now working from home? Working from home can bring a perfect work-life balance and save you the hassle of long commute, miscellaneous expenses and more. But did you know you might be leaving money on the table? Yep, those working from home expenses could score you some sweet tax relief.

Your internet, heating, and even printer ink costs add up when you’re working from home. The taxman understands this, and there’s relief available. Don’t miss out on the deductions you’re entitled to – let’s make sure you’re claiming everything you can.

Ready to put some cash back in your pocket? Let’s break down how to claim your working from home expenses like a pro.

What are working from home expenses?

Working from home expenses – they’re the extra costs that sneak up on you when your home suddenly becomes your office. I’m talking about those additional household expenses like skyrocketing electric bills from running your laptop 24/7 or the sudden need for a dedicated work phone line.

Types of working from home expenses

So, what exactly falls under the umbrella of working from home expenses? It’s all those little (and not so little) extra costs that come with the WFH territory. Think additional heating and electricity to keep your home office cozy, or the uptick in your water bill from all those coffee breaks. Even things like necessary repairs to your work space or cleaning costs for your home office area can count as working from home expenses.

Are you eligible to claim working from home expenses?

Now, the million-dollar question – can you actually claim these extra household costs on your taxes? The key here is that you must have been told to work from home by your employer, not just choosing to do so voluntarily. You also need to have incurred higher household expenses as a direct result of working from home. But here’s the kicker – you can’t double dip. If your employer is already reimbursing you for these additional costs, you can’t also claim tax relief on top of that. It’s one or the other, folks.

How to claim tax relief for working from home

So, you’ve determined you’re eligible for some sweet tax relief on those working from home expenses. But how do you actually go about claiming it? Don’t worry, we’ve got you covered.

Eligibility requirements for claiming tax relief

First things first, let’s talk eligibility. To qualify for that coveted working from home tax relief, you need to be carrying out your job duties under a formal homeworking arrangement. That means regularly working from home, not just occasionally burning the midnight oil on a project. Casual work-from-home days don’t count, unfortunately.

Gathering supporting evidence

Now, I know what you’re thinking – “Do I really need to save every single receipt and utility bill?” While you don’t have to submit a mountain of evidence upfront when claiming, it’s still a smart idea to keep records of your extra costs. You never know when the taxman might come knocking for supporting documentation.

Filling out your tax return

The moment of truth – tackling that tax return. If you’re an employee, you’ll claim the working from home tax relief as part of your annual self-assessment. For my fellow self-employed folks, it’s just another day in the life of navigating the world of taxes. If you need reliable professional assistance to file your tax returns, visit Sleek and explore tailored services for your needs.

Not sure what are UK tax brackets? Fret not, we have created a guide explaining all you need to know!

Flat rate vs actual costs for claiming working from home expenses

When it comes to claiming those precious working from home expenses, you’ve got a choice to make – the flat rate method or actual costs. But which one is right for you? Let’s break it down.

Pros and cons of flat rate method

The flat rate method is like the easy-breezy, no-fuss option. You don’t have to meticulously calculate the business portion of your household expenses – it’s a simple flat rate based on the hours you work from home each month. But there’s a catch – the flat rate doesn’t include telephone or internet costs. Those you’ll still need to claim separately based on your actual usage.

Pros and cons of actual costs method

Now, if you’re a stickler for detail and don’t mind a bit of extra record-keeping, the actual costs method might be more up your alley. With this approach, you can potentially recoup more of your hard-earned cash by claiming the exact portion of your household expenses that went towards your work. But fair warning – this method requires some math gymnastics. You’ll need to apportion your expenses based on things like the size of your work space and the hours you worked from home. It’s not for the faint of heart.

Which method should you choose?

So, which route should you take – flat rate or actual costs? Ultimately, it depends on your unique working from home situation. If you’re clocking some serious WFH hours and have the receipts to back up substantial expenses, the actual costs method might be worth the extra effort. But if you’re more of a “keep it simple” type or your extra costs are fairly minimal, the flat rate method could be the way to go. And remember, you can only use the simplified expenses flat rate if you work from home 25 hours or more per month.

Key Takeaway:

Working from home brings extra costs, like higher electric bills or a new work phone line. To claim tax relief, you must be required to work from home by your employer and have increased expenses as a result. Choose between the flat rate method for simplicity or actual costs for potentially bigger savings, but keep those receipts just in case.

Common allowable working from home expenses

When you’re working from home, there are certain expenses you can claim to help offset the extra costs. These are known as “allowable expenses.” But what exactly can you claim? Let’s break it down.

Heating and electricity costs

If your utility bills have gone up because you’re working from home, you can claim the additional amount as an allowable expense. This doesn’t mean you can claim your entire heating and electricity bill. Only the increase due to working from home is eligible.

Water bills

In most cases, water bills can’t be claimed as an allowable expense. But there are exceptions. If you have a metered water supply and your usage has gone up because of work, you may be able to claim the extra cost.

Phone and internet expenses

If you use your personal phone or internet for work, you can claim a portion of these costs. But there’s a catch. You can only claim for the business use of these services. So if you already had broadband internet before working from home, you can’t suddenly claim your entire bill.

Necessary repairs

Had to fix something in your dedicated work space? You may be able to claim it as an allowable expense. But general household repairs don’t count. The repair has to be directly related to your ability to work from home.

Cleaning costs

If you’re paying extra to have your work area cleaned, this could be an allowable expense. But you can’t claim for general household cleaning – only the additional cost for your work space.

Calculating your working from home expenses

Okay, so you know what you can claim. But how do you actually calculate your working from home expenses? It’s not as hard as it sounds. Promise.

Determining your dedicated work space

First, you need to figure out what portion of your home is used just for work. Measure your work area and calculate it as a percentage of your home’s total square footage. So if your office takes up 100 square feet and your home is 1000 square feet total, your work area is 10% of your home.

Apportioning expenses based on work hours

Next, you’ll apportion your allowable expenses based on how many hours you work from home each month. Let’s say you work from home for 50 hours in a 200-hour month. That means you worked from home 25% of the time. You can claim 25% of your allowable expenses for that month.

Not sure how to calculate your take home pay? We have created an in-depth guide providing you with all the information you need.

Example calculations

Still not quite clear? Let’s look at an example. Say your monthly electricity bill is £100 and your gas is £50. Based on the size of your work area (10% of your home) and the hours you worked from home that month (25% of total hours), you could claim: £10 for electricity (10% of £100) £5 for gas (10% of £50) £3.75 for electricity (25% of £10) £1.25 for gas (25% of £5) So your total claim for heating and electricity that month would be £5.

Submitting your working from home expenses claim

You’ve calculated your expenses. Now it’s time to submit your claim. But when do you do it? And how?

When to file your claim

You claim working from home expenses on your annual tax return. For most people, that means submitting your claim at the end of the tax year. But if you do your taxes monthly or quarterly, you can claim then too.

Completing the relevant tax forms

The specific forms you need to fill out will depend on your employment status. If you’re an employee, you’ll claim your expenses on your annual tax return. Self-employed? You’ll use the self-assessment system. And if you’re the director of a limited company, you’ll claim via your corporation tax return.

Providing supporting documentation

When you submit your claim, you don’t usually need to send in receipts or other evidence. But it’s a good idea to keep records of everything, just in case HMRC asks for proof later on.

What happens after submitting your claim

Once you’ve submitted your claim, HMRC will review it. If everything looks good, they’ll adjust your tax code so you pay less tax going forward. In some cases, they may send you a refund for allowable expenses from previous tax years. And if they have any questions about your claim, they’ll reach out and ask for more information or evidence. But as long as you’ve kept good records and only claimed what you’re eligible for, you shouldn’t have any problems.

Key Takeaway:

Working from home? You can claim expenses like increased heating, electricity, and specific repairs. Measure your work area and calculate its footprint to figure out what you’re owed. Keep records and submit your claim with your tax return to get those costs back.

Conclusion

So there you have it – your crash course in claiming tax relief on your working from home expenses. It might seem like a bit of a headache at first, but trust me, it’s worth it.

Word to the wise: track your expenses like a hawk, double-check your math, and get that claim submitted on time. If you’re ever scratching your head over something, don’t be too proud to ask for a hand. It’s better to spend a little extra time getting it right than to miss out on the fruits of your labor.

If you need reliable services for business registration, accounting, bookkeeping, and tax compliance, speak to our friendly experts at Sleek. We will be happy to help you fulfil all your requirements affordably without any hassle.

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