Work at Home Tax Can Help With Energy Bills

Employer Help

The first in our list of work at home tax reliefs is the simplest: ask your employer to help. Employers can make a payment of £6 a week, which is £312 a year, for reasonable additional costs incurred for working from home. While most employers won’t be thrilled with the prospect of paying out more money, it is tax exempt, which is what makes it more appealing.

Employers don’t have to make these work at home tax relief payments if you work from home, but if you don’t ask, you don’t get. This working from home tax relief is also the easiest as you don’t need to keep records, providing your expenses don’t amount to more than £6 a week. However, if you need more than this, your employer should ask for evidence and you’ll both have to keep records.

In order to qualify for this tax-exempt work at home tax relief, you must have an arrangement in place where you regularly work from home. This needs to be frequent and follow a pattern, as informal or occasional instances where you work from home aren’t enough. If you work three days in the office and two days at home, even if they change on a weekly basis, that should be sufficient.

Were you asked to work from home? Don't forget to claim.

Flat Rate Work at Home Tax Relief

If you’ve gone down the first avenue and haven’t been fortunate, you may be able to claim relief from the government. Rather than getting the full amount from your employer, you can claim work at home tax relief on £6 a week. You’ll receive a portion of this, depending on your rate of tax, e.g., 20% basic rate taxpayers will receive £62.50, which is 20% of the yearly £312 amount.

In order to claim this flat rate, you must be required to work from home. This is much stricter than a regular home working arrangement. You could qualify if it’s written into your contract that your home is your place of work or if office space isn’t available from your employer, but you can’t claim this work at home tax relief if you choose to work from home.

These rules were relaxed during the pandemic for the tax years 2020/2021 and 2021/2022, which meant anyone who worked from home for even a day was entitled to claim the work at home tax relief for the whole year. While the relaxation is still in place, lockdown restrictions eased, which meant people were no longer required to work from home. Even if you are allowed to work from home some or all of the time, you won’t be able to claim this year’s tax relief, including if you work from home because of COVID-19.

Did you work from home during the pandemic? You could be owed hundreds in tax relief. Read our complete guide to the working from home tax rebate for more information.

Claim On Annual Costs

If the thought of £6 a week is nowhere near the working at home tax relief you need, you can always work out your actual work-related costs instead. This is much harder and requires good bookkeeping skills, but can balance in your favour.

Not only would you need to find out the total cost of your utility bills, but you’ll need to identify the proportion of this that is used for work purposes. While it is more effort, it can lead to a bigger amount of work at home tax relief. It’s worth noting that council tax, mortgage payments and rent don’t count as employee expenses because these would have been incurred regardless.

While HMRC doesn’t provide complete guidance on how working from home tax relief should be calculated, you are expected to take into account your usage, what that proportion is compared to the area of your home and how long it is used for work purposes.

As an example of work at home tax calculations, your home is a house with five rooms, not counting bathrooms, the hall or landing. If you only work from home in one room, effectively a fifth of your home is used for business. If your monthly electricity bill is £150, you can claim a fifth of this: £30.

This does need to be a fair method of working out costs though. You’ll need to show that you’re only claiming work at home tax relief for the portion of your expenses that relate to business use and not personal use. To get a more accurate number, you could divide the total bill by the floor space for the room you use for business instead.

You can alternatively use a proportion based system for work at home tax calculations by working out what percentage of the room’s use is for work and personal use. If you use your office for ten hours a day, but two of these hours aren’t to do with work and are for personal use, you will have an 80% work use for the room.

If you then take this percentage and multiply it by the electricity bill, you’ll receive the total amount for your work usage. If we use the same figures, £30 x 80% equates to a £24 work at home tax relief. This can be added to any other rooms you use for work purposes and can be calculated for other various costs, including heating and internet use in order to work out your total working from home tax figure.

You’ll need to keep a copy of your household bills and workings in order to claim work at home tax relief on this. It’s also pertinent to do so if you change energy supplier.

Self-Employed Tax Return Deductions

Our fourth work at home tax relief applies to the self-employed. Working from home can be deducted as an allowable business expense. You’ll be forgiven if you haven’t done this before as it’s easy to forget. You won’t necessarily have a receipt or specific account entry to remind you to include it as a deduction when doing your tax return, but it’s important to keep it in mind when it comes around.

In order to calculate this working from home tax amount, you can make use of HMRC’s expenses regime, which broadly offers a flat rate expense for work at home tax relief. This saves calculating the proportion of utility bills, as mentioned in the previous step, and is instead linked to the amount of business hours worked each month.

Unlike regular employees, self-employed individuals can claim this work at home tax relief on top of a business proportion of council tax, mortgage interest/rent costs and internet and phone costs.

While you may get more work at home tax relief if you work out your actual usage, the HMRC flat rate system is much simpler to calculate and can save you time. Providing you have calculated your working from home tax hours correctly, you should also be safe from HMRC scrutiny as well.

When filling out your tax return, don’t forget extra items, such as additional household insurance, printer ink and any software packages you may have needed. Be careful not to deduct work at home tax expenses on your tax return twice. This can be easily done when you report figures to HMRC or the Department for Work and Pensions.

Benefits

Finally, our last work at home tax relief focuses on benefits and tax credits. You may be able to make a claim for any expenses incurred if you work from home and receive these benefits. If you were asked to work from home through the pandemic, read our guide to the HMRC tax rebate for more details.

If you’re on Universal Credit or tax credits and incur working from home tax expenses, you’ll need to inform the Department for Work and Pensions or HMRC about any costs incurred while working from home. This could reduce your earned income for Universal Credit or tax credits, meaning a higher award. As with all benefits, it’s better to be honest, as this work at home tax relief affects your claim.

For the self-employed, the rules on what can be deducted can be different for benefits than tax, so carefully check the rules of any specific benefit you’re claiming to make sure you don’t miss out on any benefits from any work at home tax relief.