Ah, the simple pleasures of the home office. No one to scold you for rolling out of bed late, working in your pyjamas, or dropping crumbs all over your desk.
But as well as giving you the freedom to play by your own rules, did you know that working from home can also help pay the bills?
Yes, using your home as an office can bring with it some nifty financial perks. But to take full advantage (and stay on the right side of HRMC), you’ll need the facts.
So what can be claimed as legitimate home-as-office expenses, and what can’t?
There are two schools of thought around home-as-office expenses. Which school you side with really comes down to the nature of your business – and your reasons for working from home.
School One permits you to claim £4 per week, along with further variable costs if you make considerable use of your home office.
School Two sees you claim a proportion of the total expenses, depending on your home office’s size, and how you use it.
If you run a small service company (with a director and a sole employee, for example), in order to claim in excess of £4 per week you will need to carry out a large slice of your work from home.
Crucially, you will also need to persuade HRMC that you wouldn’t be able to carry out the same work from your client’s base.
So if you could work at your client’s – but instead prefer the work-from-home lifestyle – HRMC probably won’t take kindly to your inflated expense account!
If, on the other hand, you depend on your home office as your main place of work, you can also claim additional allowance for:
- gas and/ or electricity
- metered water costs (but not fixed water charges)
- business phone calls
It’s worth remembering you can claim £4 per week towards water and gas/ electricity without showing any evidence, so it’s a hassle-free way of bringing in around £200 a year for the pleasure of being your own boss.
However, fixed expenses such as Council Tax, mortgage interest or rent are strictly off limits.
You can find out more on the HMRC website < http://www.hmrc.gov.uk/manuals/eimanual/eim32700ct.htm >: see EIM 32805, EIM 32806 and EIM 32807.
Now let’s look at School Two. This requires a little number crunching, but is simple enough to calculate.
Anyone who’s self-employed – or seen as self-employed under Section 34 of ITTOIA – can claim a proportion of expenses for using their home office.
The total amount claimable depends on a calculation of space and usage. For further details, take a look at HRMC’s website. < http://www.hmrc.gov.uk/manuals/bimmanual/bim47810.htm >
Many directors of small companies also extensively use their home-as-office for business purposes, and can therefore be classified as self-employed and claim under School Two.
The same goes for many contractors and small business – so it’s worth thinking about your circumstances.
To sum up: those who legitimately make use of their home office under the HRMC guidelines can use School Two to regularly claim over £4 per week.
If, on the other hand, working from home is more of a once-in-a-while treat, then we recommend that you play it safe and claim the standard £4 weekly.
We’re always happy to help clear up any confusion around what can and can’t be claimed when working from home, so get in touch if you have any questions. In the meantime, here’s to working in your PJs more often!