Some of us have to work at home; others see the idea as the perfect solution to a noisy office, endless interruptions, or a long and expensive commute. But if you are seriously thinking of leaving the office on a permanent basis, there are a number of questions you must first consider.
I am considering working from home to avoid the long commute to the office every day. What household expenses will HMRC allow me to claim tax relief on?
If you are a self-employed person, you can claim costs in your accounts that are incurred wholly and exclusively for the purpose of your business. This reduces the amount of tax you pay on your profits. The key to claiming expenses is to ensure that they are reasonable in relation to the type of business being operated.
Having somewhere to do your business paperwork is essential. If you don't maintain a separate office, you can claim a reasonable proportion of those household running costs that represent the space and time in which your office operation occupies your home. This includes a proportion of your rent and rates. You can also claim the cost of business related telephone calls, but not a proportion of telephone line rental. HMRC will also not allow you to claim mortgage or insurance costs if you do not have a dedicated office. These amounts are considered to be fixed whether or not you work from home, so you can't reclaim any part of these costs to reduce your taxes.
If you are merely working from home a couple of days a week for your employer, HMRC prefers employees to reclaim the costs of home-working from their employers directly. If you have agreed with your employer that you will work at home for all or part of your working time, your employer can reimburse you for the extra household costs used during that time, for example, heating and electricity.
If you want to claim more than £4 per week, excluding telephone calls, you must be able to demonstrate that your energy bills have increased by more than this amount.
Working from home offers flexibility but it also requires true self-discipline and organisation. Working at the kitchen table is rarely conducive to an efficient frame of mind. Making a mental and physical distinction between your home and your working life is essential, both to resist the distractions of the television or garden, and, at the other end of the scale, to prevent work from wholly consuming your life.
Creating a dedicated working area is essential, while separate telephone lines for home and business could help you to maintain the boundary between 'work' and 'home' time.
Bear in mind that you may need to revise your insurance policy to cover business equipment in the home and if you claim part of your home is being used exclusively for business use there is a possibility that a capital gain could arise when you sell you home in the future, as your office would not qualify for principal private residence tax relief.
The advice in this column is specific to the facts surrounding the questions posed. Neither FPM Accountants LLP nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.