Maximizing Your Remote Work Benefits: Understanding Claimable Expenses for WFH
The landscape of work has evolved dramatically in recent years, with a significant shift towards working from home (WFH). This change has brought about a new set of considerations for British employees and business people, particularly regarding the expenses they can claim to reduce their tax liabilities. Understanding what constitutes an allowable expense and how to claim it is crucial for anyone working from home, whether employed, self-employed, or running a limited company. This article aims to demystify the process and provide clear guidance on the main allowable working-from-home expenses.
The Essentials of Claiming WFH Expenses
‘Allowable expenses’ are business costs that are essential to your operations and can be deducted from your tax to decrease your annual tax bill. For instance, if your business turnover is £40,000 and you claim £10,000 in allowable expenses, you’re only taxed on the remaining £30,000. These costs can range from office supplies and travel to training courses. When working from home, you can also claim a portion of certain household expenses, such as council tax, utilities, and internet services. However, personal expenditures are not included.
For limited company directors, the rules differ slightly. You can deduct business costs before tax, but any personal use of items must be reported as a company benefit.
Eligibility for WFH Expense Claims
If you’re working from home, you may be eligible to claim allowable expenses to reduce your tax bill. This applies whether you’re employed, self-employed, or own a limited company. Employees can claim tax relief for compulsory work-from-home situations or for out-of-pocket expenses on work items. However, you cannot claim for expenses if you’re reimbursed by your employer or if you opt to work from home without necessity.
The rules vary depending on your employment status, and it’s advisable to consult your employer or accountant for specific advice on deductions.
Deductible Home Office Expenses
Several home office expenses are deductible, including:
- Mortgage Interest or Rent: Self-employed individuals can claim a portion of their mortgage interest or rent based on the number of usable rooms in their home.
- Internet Costs: A proportion of home broadband costs used for business can be claimed.
- Council Tax: A percentage of council tax can be offset against your tax bill if you’re self-employed and use part of your home for work.
- Home Contents Insurance: Some of your home contents insurance may be deductible if it covers your home-office equipment.
- Mobile Phone: Business use of a personal mobile phone can be claimed as an allowable expense.
- Subscriptions: Costs for trade journals and professional memberships may be deductible for the self-employed, excluding payments to political parties, gym memberships, or charity donations.
Claiming Your Tax-Deductible Business Expenses
The process for claiming tax-deductible expenses varies:
- Employees: Claims can be made online through HMRC, with guidance provided based on the type of expenses. Relief can be claimed on £6 a week without evidence or the exact amount of extra costs with proof.
- Self-Employed: Allowable expenses are claimed through the annual Self-Assessment tax return, with records kept in case HMRC requests evidence.
- Limited Company: Expenses can be deducted from profits to reduce corporation tax, with accurate records kept for six years.
Conclusion
In conclusion, by understanding and claiming all your allowable expenses, you can significantly reduce your tax bill. The rules can be complex, and it’s essential to engage with a professional accountant to ensure you’re claiming correctly. Always retain receipts for business-related expenses to substantiate your claims to HMRC if required.
For further insights into working from home and which expenses you can claim, explore our comprehensive guide on maximising your WFH expense claims.
