Working from home 🏠 tax allowances

If you're self-employed and work from home, you'll incur additional home running costs on which you can claim tax relief by following these rules.

Whilst HMRC's video is a nice summary (from min. 0.26), follow the guidance below to implement it correctly.

HMRC allow you to claim via two methods:

Option 1(a) (for Sole-traders and Partnership): Claim a flat rate expense of £10 - £26 per month (depending on the number of hours working from home): https://www.gov.uk/simpler-income-tax-simplified-expenses/working-from-home

Option 1(b) (for employees, possibly including directors): Claim a flat rate expense of £6 per week only if your employment demands that you work from home. In practice, this rarely applies to directors of their own limited company: https://www.gov.uk/tax-relief-for-employees/working-at-home

Option 1 is most appropriate if you don't have a dedicated home office (e.g. you use the kitchen table) or you simply don't want to prepare the workings required for option 2 below.

Option 2: Calculate the actual business proportion of your home running costs and rent your home office to your business: https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim47825

Option 2 is most appropriate if you have a dedicated home office/workspace where you spend most of your working time.

To implement option 2, you'll need to:

1. Prepare workings (download the appropriate file below)

2. Have a signed rental licence agreement in place (we can provide a template to clients)

Use of Home Workings SOLE-TRADER or PARTNERSHIP.xlsx

Download XLSX • 22KB

Use of Home Workings LTD CO.xlsx

Download XLSX • 24KB

Would you like help to pay less tax? Feel free to get in touch or check out our related posts 👇