There are generous tax reliefs which employees and self employed can claim when they work from home.
Certain conditions must be met in order to qualify for the tax relief:
Self Employed Working From Home
There are flat rate allowances which a self employed worker can claim. The allowance is based on the number of hours worked from home per month, but it has to be a minimum of 25 hours:
- 25 to 50 hours – £10 per month
- 51 to 100 hours – £18 per month
- 101 hours or more – £26 per month
The flat rate allowance is used instead of proportioning any expenses relating to the home, but you can claim for telephone and internet costs in addition to the above which relate to business use.
The flat rate allowance may vary throughout the year if you work different hours from month to month.
For example you may work 20 hours per month for three months, 30 hours per month for four months and 55 hours per month for five months. The calculation for the flat rate allowance is as follows:
- £0 for the three months worked at 20 hours
- £10 per month for the four months worked at 30 hours
- £18 per month for the five months worked at 55 hours
- Total = £130 for the year
Employees Working From Home
Expenses that are incurred must be wholly and exclusively in the performance of the employees duties, for example:
- Gas and electricity consumed while a room is used for work
- Metered water used in the performance of the duties. No tax relief for water rates
- Cost of business telephone calls including internet access
Employees who work from home and satisfy the conditions for the relief are entitled to a deduction of £4 per week or £18 per month without having to justify the allowance figure.
If the employees wish to deduct more than the entitled allowance, they must keep records and be able to prove how the figures have arisen.
The general rule for expenses incurred by employees and self employed is that expenses are allowable as a deduction if they are incurred ‘wholly and exclusively for the purpose of the trade’.