The amount you can claim when you work from home depends on several conditions.
The general tax rule is that deductions are only allowable where the expense has been incurred wholly and exclusively for work. This means that the tax relief can only be allowed for;
- The additional cost of gas and electricity consumed while in a room being used for work
- The metered cost of water used when performing the work
- The unit cost of business telephone calls including dial-up internet
HMRC normally accepts that employees who satisfy these conditions for relief are entitled to a £4 per week deductions for each week they have to work at home.
If employees wish to deduct more than this, then they must keep records to show why.
Employees wishing to claim need to fulfill the following conditions:
- The duties carried out are part of the central duties of employment
- The duties need appropriate facilities to be performed
- No facilities are available at the employer’s premises/The nature of the job means the employee lives a long way from the premises
- The employee is not able to choose between working at the employer’s premises
Self-employed people can calculate the allowable expenses using a flat rate based on the number of hours worked from home as long as they work at least 25 hours from home a month.
The flat rates are as follows:
25 to 50 hours £10 per month
51 to 100 hours £18 per month
101+ hours £26 per month.
If the flat rate is used you can still claim telephone and internet costs which relate to the business.
There are potential capital gains tax ramifications.
If part of the home is used exclusively for the purpose of a trade or employment then this reduces the capital gains tax exemption when selling the property.
This reduction would not happen if the area used for business is also used for non-business purposes.