Tax Relief When Working From Home

HMRC allows some generous tax reliefs for both employees and the self employed who are working from home.

tax relief when working from home

If you are working from home, then you may be entitled to claim tax relief.

This is restricted to the purchase of items “wholly, exclusively and necessarily” for work.

This may include:

  • The additional cost of gas and electricity
  • The cost of water used when performing the work
  • The cost of business telephone calls
  • Printer Paper
  • Scanner

The list goes on!

Self-Employed Working from Home

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

For example you may work from home for 20 hours for one month, 50 hours for two months, and 120 hours for three months. The calculation for the flat rate allowance is as follows:

  • £0 for the first month with 20 hours worked from home
  • £10 for the two months with 50 hours worked from home
  • £18 for the three months with 120 hours worked from home

Total = £74 for the period worked from home

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

Employees Working from Home

Employees wishing to claim this 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

HMRC normally accepts that employees who satisfy these conditions for relief are entitled to a £4 per week or £18 per month for the time they are working from home without having to justify the allowance figure.

If employees wish to deduct more than this, then they must keep records to show why.

Claiming for Purchase of Equipment

If you have to make a purchase to be able to carry out your work from home then you could claim this back from the taxman.

You receive relief on the purchase at your tax rate. For example, if you pay tax at 40% and claim for a computer and printer worth £2,500, you would receive £1000 back.

HMRC says the tax relief is strictly for the performance of employment duties, which can be difficult to prove.

Items such as broadband that is also be used for leisure would probably not be allowed under this system, but, if you can demonstrate that is is wholly and exclusively for business purposes, then it can be allowed.

More Detail

If you are self-employed you should claim your working expenses as normal in your Tax Return.

If you’re employed and the expenses are up to £2,500 a year then you should submit a P87 form, which can be found on the government Gateway website, and can be sent in by post or online.

If the expenses are over this limit, then you will have to submit a Tax Return