If you work from home, then you can claim a tax deduction.
Employees including Company Directors
Your employer is allowed to pay you a £6 week/£24 month allowance if you have to work from home. The £6 p/w applies from 6 April 2020 onward, previously it was £4 p/w
A larger amount can be paid, but it would have to be worked out on the principles below or be subject to tax on the excess.
If you are obliged to work at home regularly but your employer doesn’t pay you this allowance, you can make a direct claim to HMRC
Sole Traders and Partners
Under HMRCs “simplified expenses” regime, you can claim:
- £10 a month if you use your home between 25 and 50 hours a month
- £18 a month if you use your home between 51 and 100 hours a month
- £26 a month if you use your home more than 101 hours a month
Don’t worry if you don’t work 25 hours a month at home – you can still make a claim, but it has to be based on actual or estimated costs of working from home. HMRC may ask you to justify your calculation, but in practice its unlikely. In all honesty a fixed £100 a year is unlikely to cause problems, and HMRCs internal manuals specifically tell Tax Inspectors not to waste time checking small claims.
You can claim a business proportion of home phone/internet on top of these amounts.
Claiming Actual Costs
If you can’t use the standard allowances above, or feel your claim should be higher, then here is how to work out the actual costs:
Step 1 – Work out the costs of running your home, eg:
- mortgage interest (not capital repayments)
- council tax
- water rates
Step 2 – Apportion this – there is no precise method of doing so, but as a rule use either the number of rooms (excluding kitchens, bathrooms and halls) or a floor area basis. If a room is shared, eg private study and business study then take this account into the apportionment.
HMRCs internal guidance on such claims is at BIM 47815 et seq
Effect of claiming for Office at Home Expenses
Unless you have an area specifically dedicated for business use only, there should be no Capital Gains Tax or Business Rates concerns.
If you have people coming to the house, check with your insurers, and if relevant landlord or mortgage company.
For administration use only, planning consent should not be needed, and it almost certainly isn’t needed for an occasional business meeting.