Spare no expense working from home

If the world of expenses can sometimes feel like a minefield, don’t worry. We’ve asked one of our partners, Christian Hickmott – Founder and CEO of Integro Accounting to share his advice on your rights to claiming expenses when home working.

All freelancers who work from home both want and should make the most of the benefits of doing so when it comes to expenses. But it’s not always obvious what you can and can’t claim and, if you can, to what extent.

In this blog we want to make sure you know what expenses you should and could be claiming for. The past 12 months have seen an unprecedented number of people new to home working, as well as freelancers who may be more used to the set-up. Here is what we will cover:

Table of contents

• The use of home as an office
• Telephone and internet costs
• The impact on your mortgage and home outgoings
• What can you claim as an employee while working from home?
• Travel
• Food and accommodation
• Conclusion

The use of home as an office

What you can claim partly depends on the work that you do. On the whole, freelancers can claim tax relief on office equipment such as computers and furniture if it is classed as essential for you to be able to run your business. Of course, you will need to be able to prove to HMRC (should you be asked to do so,) that you regularly use this space for work. If the majority of your work is done elsewhere, you won’t be able to claim to the same extent. 

Along with office equipment and furniture, remember to consider things like printers, printer inks, computer software and stationery (including postage).  Again, this is not a wish list, but anything that is genuinely needed for you to be able to run your office should be factored.  Some of these will be minimal expenses, but they all add up, so make sure you include anything relevant, however small.

And let’s not forget that you are using a part of your home for work purposes and should be compensated for that.  After all, your costs will include part of your mortgage or rent, gas, electricity, water, Council Tax, and insurance. Make sure you include these expenses as they are all legitimate. More on this later.

Telephone and internet costs

When it comes to land lines, line rental costs and internet costs are wholly recoverable if the line is a separate one for your business only.  Otherwise, you’ll be able to claim the itemised calls on your bill that are for your business.

The same applies to mobile costs.  If your mobile is for business only the costs are fully refundable. Claiming for business use on a personal mobile is far trickier because minutes are usually within the contract and therefore don’t have an easily identifiable breakdown to claim.  So, it is worth considering a separate mobile for business purposes only to keep things simple.

The impact on your mortgage and home outgoings

By working from home, you are effectively allowing your business to use one of your rooms. 

If you have, for example, four rooms and you use one of those as an office for a working week, you are entitled to claim 25% of the mortgage (only the interest element, not the capital) or rent.  You should be able to find the interest figures on your mortgage/rent statements. 

If you want to claim for more than one room, you will need to provide proof as to why you are using the additional space. In addition, you can also claim back repairs if they are necessary for you to keep running your business. 

As mentioned previously, other house outgoings you can claim for include: 

• Heating
• Electricity
• Mortgage payments (only the interest element, not the capital)
• Home insurance (only if it includes business cover)
• Repairs and cleaning if they apply to the whole house
• Council tax

To calculate this successfully, you will need to add all these costs for the period worked and then divide this by the number of rooms in your property, not including the bathrooms. This will give you the cost per room.

Then work out how much time you use each room for business.  For example, if your family are using the living room for ten hours a day and you work from there for 2 hours a day, you could claim 20% of the cost of the living room for the period.

This area can get more complicated depending on your job, so if you are unsure, please always consider obtaining professional advice.

What can you claim as an employee while working from home?

Remote working has become something of the norm, particularly over the past few months. This is different from running a business from home, but employees can still be recompensed to a certain extent.

To be able to claim as an employee, you must still be carrying out your normal job requirements, but from home instead of the usual office. Any claims can start from the date your employer agreed you could be home-based, or, alternatively, when the government first advised employees to work from home back in March 2020.

The employer can pay the following. These are fixed amounts:

• £6 per week for employees paid weekly (prior to 6 April 2020, this is £4 per week)
• £26 per month for employees paid monthly (prior to 6 April 2020, this is £18 per month)

Claiming in this way has the following benefits:

• Employees do not have justify any expenditure or keep any expense records
• The weekly flat rate applies to full-time and part-time workers equally.
• Employees do not have justify any expenditure or keep any expense records
• The weekly flat rate applies to full-time and part-time workers equally.

If these flat rates are inappropriate, providing there is evidence for additional costs, a large tax-free amount can be paid. This is to cover additional costs to the employee incurred because of working from home, such as additional phone and internet costs (although not the lines if they were already in place), as well as lighting and heating costs, etc.

However, unlike freelancers who always work from home, those doing so due to Covid-19 cannot claim for mortgage interest or rent, council tax or water rates as these expenses have not increased.

Travel

Any journey taken to enable you to conduct your business can be claimed as an expense. However, this does not apply to journeys between home and your ordinary workplace.

Mileage

You can claim a fixed rate for every business mile you travel. This is currently set at 45p per mile for the first 10,000 miles travelled in a year. Anything above this is set at 25p per mile. If you use this method, then you cannot claim separately for vehicle running costs and servicing.

Car parking

All parking in relation to business can be claimed, providing you keep hold of the receipts.

Public transport

Again, if you keep your receipts, any fares from business journeys on public transport can be claimed.

Other travel costs

Any tolls or congestion charges are permitted, if receipts are available.

In addition, let’s also not forget those who choose to cycle, rather than drive. Just like with driving, if you are self-employed, you can claim a flat rate for every mile cycled for business purposes. Currently, this is 20p per mile. Again, this does not include commuting and you cannot claim for additional maintenance, as this is covered by the flat rate.

Alternatively, if you are purchasing a bike purely for business purposes you can buy this through the business i.e., can claim back  the cost against your taxes.  But, beware: if you do this, whilst you will be able to claim for maintenance, you cannot then claim the 20p mileage allowance. 

Food and accommodation

If a business trip requires time away from home, reasonable hotel and subsistence costs can be claimed.  Whilst you can claim for meals there are some situations to be aware of.  If you are obliged to eat out due to work commitments, then you can claim these costs through the business. If you are attending the same site for work, then it’s unlikely you will be able to claim any subsistence as a company expense as you would be eating them anyway.

Conclusion

Once you become familiar with what you can and cannot claim, and are strict with yourself about keeping receipts, claiming your expenses is straightforward. If you’re ever unsure as to your expense rights for working from home, speak to your accountant who will be able to tell you whether they are applicable or not. To recap, some claims may seem so small that they are not worth worrying about, but they all add up, so it’s worth including everything that is eligible. 

For those temporarily working from home due to Covid, make sure you put through the claims you are entitled to.  After all, you now effectively have an office at home and, as such, you will be recompensed, even if it is relatively short term.

About the author:
With almost 20 years of accountancy experience, Christian Hickmott founded Integro Accounting.  Its purpose is to provide high-quality advice from fully qualified accountants to contractors and freelancers. Integro Accounting offers a range of all-inclusive packages for the independent professional without any hidden charges.

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