If you’re one of the millions of people who have had no option but to work from home this year, then you’ll have no doubt seen a hike in your household bills but what impact will this have on your tax return? The good news is that if you’re self-employed or work via a limited company and you work from home, there are savings to be made when you fill in your tax return! Even better news is that we’re currently offering to do your tax return for just £350!
How much can you claim?
This could depend on whether or not your business is eligible to use ‘simplified expenses’ under the new cash basis. Simplified expenses are a way of calculating some of your business expenses using flat rates for things such as costs associated with some vehicles, working from home or living in your business premises. However, this only applies if you work over 25 hours per week from home. Whilst this option might be helpful rather than trying to work out your actual business costs, this won’t suit everyone as they only apply to sole traders or business partnerships, not very helpful to those of you who work via a limited company.
|Hours of business use per month||Flat rate per month|
|25 to 50||£10|
|51 to 100||£18|
|101 and more||£26|
Gov.uk give the following as an example;
You worked 40 hours from home for 10 months, but worked 60 hours during 2 particular months:
10 months x £10 = £100
2 months x £18 = £36
Total you can claim = £136
In April of this year, the Government also introduced a flat rate of £6 per week regardless of how many hours you work from home and you won’t need to keep any evidence of your extra costs. However, if you think you’ve incurred more than £6 a week in expenses, you will need to calculate the exact amount of extra costs and ensure that you’ve kept the relevant receipts, bills or contracts.
Claiming the flat rate is quicker but would you rather save time or money? Why risk paying more tax than you need to, we’ll take the worry away and guarantee that you only ever pay what you owe and not a penny more!
As Old Mr Lowndes used to say ‘Take care of the pence and the pounds will take care of themselves’ and being the famous Secretary of the Treasury, in the reigns of King William, Queen Anne, and King George I, he knew a thing or two about money.
What can I include in my tax return when working from home?
Running a limited company from a commercial office space will incur costs such as rent, business rates, utilities, insurances and service charges and these will usually be allowable costs for your company which reduce the business profit and therefore reduce the corporation tax. However, if you’re a director working from your home you are allowed to claim certain costs back from your company for the provision of the home office space.
For those of you who are self-employed and running your business from home, you can include part of your home utility bills, but you need to work out the proportion of your home that’s used for business, and what proportion of the month it’s being used for business purposes.
- Gas, electricity, water, council tax. If you use your home to conduct your work you can claim a proportion of all your household bills, gas, electricity, water and council tax against your bill. For example, if you have four rooms (excluding kitchen, bathroom and hallway) and you use one to create your YouTube channel. You’ll have to work out how much of your working time is spent in that room and then calculate the percentage you can deduct for tax purposes.
- Mortgage. The interest portion of your mortgage repayments can also be claimed, again on a pro-rata basis but you need to be aware that this is changing from the 2020-2021 tax year.
- Broadband/phone. The same goes for broadband/phone costs. You can claim for any business calls. For line rental and broadband connection, a proportion of the cost can be claimed based on business use.
- Computers. If your computer is only used by the business, you can offset the whole cost. But if the family uses it half the time … well, you get the idea.
Clearly, with the numbers of people working from home this year, the costs associated with travel and accommodation may well have reduced some of your tax-deductible expenses but don’t lose out on any of your allowable expenses.