What is working from home tax relief?
This has been an exceptional year and HMRC are working hard to find ways to support home workers. If you have been forced to work from home, you will be able to claim tax relief. It is possible to claim tax relief for this tax year, even if you do not know how long you will be working from home. To simplify the process, HMRC will apply the available tax relief to the full tax year, even if you go back to your workplace or are only working from home for a few days.
According to MoneySavingExpert, HMRC understands that the working from home situation is very fluid, so claims are being accepted for the full tax year. This means you only need to submit a single claim, rather than separate claims for each time you return to home working.
HMRC have confirmed that anyone who has worked from home at some point since 6 April 2020 will be able to claim a total of £312, which amounts to £6 per week for the complete tax year.
How does the relief work for self-employed people?
If you are self-employed you will be familiar with completing a self-assessment tax return. If you use part of your home as an office, there are a variety of household bills which can be offset against some of your annual tax bill. It does not matter how much of your home is used for your self-employment, HMRC will accept minor claims and reasonable estimates.
It is important to ensure your claim is an accurate reflection of your employment circumstances within the home, with estimates of electricity, heat, water and council tax accepted. However, these expense claims do not apply to broadband or phone use. There are many ways to calculate your potential claim, however the easiest is to use a flat rate based on the number of hours you are working from home every month. HMRC will not require receipts to prove these expenses and they can be included as an allowable expense against other claims.
The current flat rate claims are:
£10 for those working 25 to 50 hours per month
£18 for those working 51 to 100 hours per month
£26 for those working 101 hours or more per month
It is possible to calculate what proportion of your home is used for business and personal use, however it is more time-consuming. If your hours fluctuate each month, you simply base your claim on the applicable flat rate for the number of hours you work each month.
Can I claim phone and broadband expenses?
Unfortunately, it is more difficult to claim back phone and broadband expenses. This is because there is no simple way to calculate what percentage of your broadband and phone bills can be allocated to business or personal expenses.
To submit a claim, you will need to provide an itemised phone bill, which details your business-related calls and charges. However, for broadband this can be difficult as bills are normally a flat fee regardless of usage. If you already had a broadband contract before you started working from home, you will be unable to submit an expense. In addition, if you have an employer, they will not be able to reimburse you for your tax-free broadband charges.
However, HMRC state that if you needed to install broadband to enable you to work from home, the cost will be regarded as an additional household expense. This means you will be able to submit a claim and your employee can reimburse you for the tax-free amount. This also applies if you were forced to upgrade your broadband or purchase new equipment, to support your new home working arrangement.
If you are self-employed you could set up a new broadband connection using your company’s name, which would make a business expenses claim more straightforward. However, for the expense to fall within the “wholly and necessarily” rules, you will not be able to use the connection for personal use. Some individuals choose to run a separate line into the home office, which means the full cost can be claimed.
Additional expenses for office equipment
If you have purchased office equipment such as monitors, printers, software and laptops to work from home, these can be deducted from your tax bill, if you are self-employed.
However, if you are employed the business may be willing to pay for the equipment or part of the equipment. It is advisable to discuss any potential purchases with your manager first, as you may be required to cover the cost yourself. Although many employers understand that the correct equipment will improve your working conditions, so will be willing to contribute.
How to find the best broadband deal
Working from home requires the best broadband connection possible, with fast upload and download speeds and excellent reliability. If you need to upgrade your internet connection to meet the new demands of homeworking, there are some excellent deals available and you may be able to submit a claim for part of the expense.
We can help you compare fibre broadband
from leading providers such as Sky, BT and Virgin, alongside alternative providers such as CityFibre. Whether you are looking for faster speeds, inclusive calls, unlimited downloads, or a cheaper contract, we can help.
To find out more about broadband services for home workers or to begin comparing your options, please contact our experienced team today. As ever, if you have any queries over business expenses it is advisable to contact a qualified accountant.