HMRC guidance on working from home

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  1. HMRC Guidance on Working From Home

Introduction

The shift towards remote working, dramatically accelerated by global events in recent years, has presented both opportunities and complexities for taxpayers in the United Kingdom. Her Majesty’s Revenue and Customs (HMRC) provides specific guidance on the tax implications of working from home (WFH), particularly concerning allowable expenses. This article provides a comprehensive overview of HMRC’s rules, designed for individuals new to remote work or seeking clarification on their tax obligations. Understanding these guidelines is crucial to ensure compliance and potentially reduce your tax liability. This article will cover eligibility, allowable expenses, record-keeping, simplified expenses, and specific scenarios. It will also link to related topics like Tax Returns, Income Tax, and National Insurance.

Eligibility for Tax Relief

Not everyone who works from home is automatically entitled to claim tax relief on expenses. HMRC’s rules are quite specific. Generally, you can claim tax relief if your employer requires you to work from home as a condition of employment, or if you choose to work from home and this choice is necessary to fulfil your job duties. "Necessary" in this context doesn't simply mean "convenient." It means your role *requires* you to work from home.

Here's a breakdown of key eligibility criteria:

  • **Employment Status:** You must be an employee, not self-employed. Self-employed individuals have different rules for claiming expenses – see Self-Employment Taxes.
  • **Employer Requirements:** If your employer *requires* you to work from home, even for a single day, you are likely eligible.
  • **Necessary for Job:** If your employer doesn’t mandate WFH, you must demonstrate that it is a necessary condition of your employment. This could be due to the nature of your role, the unavailability of suitable office space, or other legitimate reasons. Simply preferring to work from home isn’t sufficient.
  • **Partial WFH:** You don't need to work from home *all* the time to claim expenses. Even if you only work from home for part of the week, you can claim a portion of your eligible expenses.
  • **Business Use:** The expenses you claim must be directly related to your work. Personal use must be excluded.

Allowable Expenses

HMRC allows you to claim relief on certain expenses wholly and exclusively for work purposes. These generally fall into the following categories:

  • **Household Bills:** This is often the most significant area of potential tax relief. However, the rules are complex. You can claim a proportion of bills such as:
   *   **Heating, Electricity, and Water:**  You can claim a proportion of these bills based on the area of your home used exclusively for work.  This is typically calculated as a percentage of the total bill proportional to the area used for work.  For example, if your home office occupies 10% of your total home area, you can claim 10% of your heating, electricity, and water bills.
   *   **Council Tax:** Similar to household bills, you can claim a proportion based on the area used exclusively for work.
   *   **Mortgage Interest or Rent:**  A proportion can be claimed, again based on the area used exclusively for work.  *Note:* If you are a homeowner, you cannot claim relief on the capital element of your mortgage interest.
   *   **Internet and Phone:** You can claim the *business proportion* of your internet and phone bills.  If your internet is used for both personal and work purposes, you need to calculate the percentage used for work.  If you have a dedicated business phone line, you can claim the full cost.
  • **Office Supplies:** Expenses for stationery, printer ink, and other office supplies used for work are generally allowable. Keep receipts as proof of purchase.
  • **Equipment:** You can claim the cost of equipment necessary for your work, such as a computer, printer, or office chair. For items costing more than £2,500 (the annual investment allowance), you may need to claim capital allowances. See Capital Allowances for more information.
  • **Professional Subscriptions:** Subscriptions to professional bodies or journals directly related to your work are generally allowable.
  • **Software and Apps:** Costs for software or apps used for work purposes can be claimed.
  • **Repairs and Maintenance:** Costs for repairs and maintenance directly related to your home office are allowable, provided they benefit your work.

Expenses That Are *Not* Allowable

HMRC is very specific about what you *cannot* claim. Common disallowed expenses include:

  • **General Household Maintenance:** Repairs that benefit the entire house, rather than just the home office, are not allowable.
  • **Personal Use of Utilities:** The portion of utility bills used for personal purposes.
  • **Commuting Costs:** Costs associated with travelling between your home and your usual place of work are not allowable, even if you work from home some of the time.
  • **Clothing:** The cost of clothing, even if worn for work, is generally not allowable.
  • **Food and Drink:** The cost of food and drink consumed while working from home is not allowable.
  • **Childcare Costs:** Expenses for childcare are not allowable, even if you need childcare to enable you to work from home.

Record-Keeping

Accurate record-keeping is absolutely essential when claiming expenses. HMRC can request evidence to support your claims. You should keep:

  • **Receipts:** Keep receipts for all expenses you claim, especially for larger purchases.
  • **Bills:** Keep copies of your utility bills, council tax bills, and mortgage statements (or rental agreements).
  • **Calculations:** Document how you have calculated the business proportion of your expenses. For example, clearly state the area of your home used exclusively for work and how that relates to the total home area.
  • **Diary or Log:** Keeping a diary or log of the days you work from home can be helpful, especially if your WFH arrangement is irregular.
  • **Employer Confirmation:** If your employer requires you to work from home, obtain written confirmation from them.

Simplified Expenses (Flat Rate)

HMRC offers a simplified method for claiming expenses, known as the flat rate method. This allows you to claim a fixed amount per year without needing to calculate the actual costs. As of the current tax year ([current year]), the flat rates are:

  • **£6 per week:** If you work from home for 26-52 days per year.
  • **£10 per week:** If you work from home for 53 days or more per year.

The flat rate method may be simpler, but it may not result in the maximum tax relief. You should compare the flat rate with your actual expenses to determine which method is most beneficial. You cannot claim both the flat rate and actual expenses in the same tax year. See Tax Efficiency for more details on optimising your tax position.

Specific Scenarios

  • **Renters:** Renters can claim a proportion of their rent as a business expense, based on the area of the property used exclusively for work.
  • **Homeowners with Mortgages:** Homeowners can claim a proportion of their mortgage interest (excluding the capital element) as a business expense.
  • **Living with Family:** If you live with family and work from home, you can still claim expenses, but the calculations may be more complex. You will need to apportion the expenses based on the area of the home used exclusively for work.
  • **Working from a Shared Room:** If you work from a room that is also used for personal purposes, you can only claim a proportion of the expenses related to that room.
  • **Multiple Home Workers:** If multiple people in the same household work from home, each individual can claim their share of the allowable expenses.

How to Claim

You can claim your work from home expenses in one of two ways:

  • **Online through your Personal Tax Account:** This is the most common method. You can access your Personal Tax Account on the HMRC website.
  • **By Completing a Self Assessment Tax Return:** If you are required to file a Self Assessment tax return ([Self Assessment]), you can claim your expenses on the return.

The deadline for submitting your tax return is typically January 31st following the end of the tax year.

Resources and Further Information

Disclaimer

This article provides general guidance only and should not be considered professional tax advice. Tax laws are subject to change, and individual circumstances may vary. It is recommended to consult with a qualified tax advisor for personalized advice. This information is current as of October 26, 2023. Always refer to the latest HMRC guidance.


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