Understanding Work from Home Tax Deductions
- How work from home tax deductions operate
- Calculating work from home tax
- Universal working from home tax relief
Usually, working from home tax relief is only reserved for a select few. When it comes to claiming, you can either opt for the flat rate method, which doesn’t require any evidence, or calculate your own work from home tax deductions. This is applicable for both employees and people that are self-employed.
This article will help you understand how work from home tax deductions can be calculated, as well as how much you can claim on flat rates and what you’re entitled to claim on. Working from home tax relief doesn’t have to be complicated to understand, and if you want to make a bigger claim than the fixed rate, you’ll have to put the effort in.
Who Can Make Work from Home Tax Deductions?
This is usually for the self-employed to consider when filling out their self-assessment tax returns, but it can also apply to some people who are employed by someone else.
You’re self-employed if:
You work for yourself
You set up a small business (e.g., freelance work, independent contractor or working for yourself part time)
Employed people that qualify:
Those that can only work from home
The idea behind work from home tax deductions is to ensure you’re separating the space that is designed for work use and calculating how much of your total use is specific to your job. Taxable deductions are allowed to make sure your business isn’t hampered by personal use, and vice versa.
How to Claim
There are two ways in which you can claim tax relief for working from home. This will either be through the monthly flat rate or by working out the exact costs you incur. Work from home tax deductions fall into the second category.
Claim the Flat Rate
Flat rates for the self-employed are determined by how many hours are worked from home in a single month. If you’ve worked from home between 25 and 50 hours a month, you’re entitled to claim on a flat rate of £10. This increases to £18 for up to 100 hours and then £26 for anything above this. For those traditionally employed and who work from home all the time, you cannot claim on a flat rate. Work from home tax deductions only apply if you work them out yourself.
Work Out Your Expenses
If you choose to go down this route, you will need to make sure you’re calculating everything fairly and correctly. You will also need to keep notes of your maths, as any work from home tax deductions you specify may need to be checked. This could be from an external audit from HMRC, for example.
What Qualifies as Tax Deductible?
The space you usually work at home needs to be exclusively used for business purposes and on a regular basis. Mixed-use areas, such as dining rooms, the living room or otherwise, don’t count. Any form of storage is acceptable if it is solely for business use. Work from home tax deductions can be calculated in mixed-use areas if you’re self-employed, but these must be reasonable and should only reflect the actual business use.
Tax Deductible Items
Contents and buildings insurance
Telephone, internet and mobile bills
Rent or mortgage (partially)
Office equipment and furniture
How to Calculate Work from Home Tax Deductions
Working out the exact expenses you incur when it comes to working from home can be done in a number of ways, as there’s no set guidelines from HMRC. Work from home tax deductions operate by percentage use of your total costs, unless they are completely exempt. Rent, bills and ongoing costs can all be lumped together and any percentage for office use can be calculated and applied.
You can split your bill by the number of rooms and claim on the proportion that’s solely used for business, such as a study or office. For clarity, bathrooms, halls and landings don’t count as rooms, as this will skew the costs for your work from home tax deductions. You can also take it one step further and measure this based on the square metres of your home office environment.
Alternatively, work from home tax deductions can be calculated by working out what percentage use of a room is for work purposes and for leisure. This is the trickier way to do it though, as you will have to determine the amount of hours that are used for each purpose. By doing this, you can use the room split figure outlined above and then times it by the percentage you’ve come to. Any sums that you do will need to be kept as you will need to prove your true costs in relation to working from home tax relief. It has to be a fair calculation.
As you can see from the graph below, of the £1,350 that’s been identified as work from home tax deductions, 10% has been calculated in line with these figures. This means that every month, £135 can be put down as a deductible expense. These are usually claimed at the end of each tax year.
When it comes to work from home tax deductions, you can’t exceed your gross income. Expenses that are more than what you earn for the year will have to go unclaimed.
Part of the government’s Coronavirus help for the working population was to expand the qualifying criteria for working from home tax relief. If you were told to work from home, even for just one day in the tax years 2020/2021 and 2021/2022, you can still make a claim. If you’re looking to claim for these tax years, you have until April 2025 and April 2026. You also don’t need any proof of expenditures. This was mainly to apply universally, without having to calculate work from home tax deductions.
If you’re unsure whether you qualify for working from home tax relief through the Covid years, you can check your eligibility by filling in your details. A claims management company is able to do all the hard work for you. This will include checking how much you’re entitled to and filing your claim on your behalf.