What tax relief can i claim for working from home?

January 31, 2019|In KRW Q&A|By Keith Witchell

Most business owners will do some of their work from home, but what tax relief can they claim for this? An unincorporated taxpayer (i.e., a sole trader or partner in a partnership) may be able to claim a proportion of its costs for working from home for things like:

  • Utility costs – gas, electric, water etc;
  • Council tax
  • Mortgage interest (or rent)
  • Internet and telephone use

An appropriate proportion can be ascertained by finding a reasonable method of dividing the above costs between the areas of the property used by the business and those used personally. For example, by the number of rooms, and/or by the time spent working from home. Be careful though, as if you claim that one (or more) room is used exclusively for business to help bolster your proportionate claim for the above expenses, there could be a sting in the tail; when you come to sell your house and claim the private residence exemption from Capital Gains Tax then this can be restricted where parts of the house are used exclusively for business, which in turn could lead to an unwanted Capital Gains Tax liability. However, if the room has some personal use too (eg. the kids do their homework in the study sometimes) then this risk can be removed. As an alternative, in 2013 the government introduced a simplified basis for claiming some expenses, which included a flat rate deduction for home working costs where the taxpayer works 25 hours or more a month from home. This is designed to cover all of the above costs, except for internet and telephone costs which can be claimed in addition, and is as follows:

Hours of business use per monthFlat rate per month
25 to 50£10
51 to 100£18

So what about employees and Directors? Unfortunately, the tax rules are tougher for employees and you have to consider whether the individual has to work from home, or chooses to work from home. Either way the claim will generally be lower than for the self-employed, as it is based on the additional costs incurred for home working, and not a proportion of existing costs. Again though, a simplified claim can be made of £4 per week (or £18 per month) without substantiation, with the business use proportion of home phone and internet costs on top.

Key Facts

  • Sole traders and partners can claim for a proportion of home costs if they work from home
  • This is usually based on the room/s used for business and time spent
  • A flat rate claim can be made instead for those working more than 25 hours a month from home
  • Employees and Directors can claim too, but the flat rate claims can be lower

For further advice on this matter, please contact me.

Keith Witchell