When working from home in the UK, you can claim expenses for products and equipment used in a similar way that you would have used at an office, such as computers and printers, pens, pencils, electricity and even heating costs.
Is a Home Office Deduction Right For You?
If you work out of your house and have a significant amount of office-related costs (such as an internet connection, software, or a business phone line), there’s a good chance you can take advantage of tax breaks available to home office deductions.
If you qualify for these deductions, you could potentially save hundreds of pounds on your annual tax bill—especially if you itemize your deductions.
However, claiming these savings isn’t as simple as it sounds; make sure to consult with a professional before attempting to reduce your tax liability.
When Can I Claim My Home Office Expenses?
Taxpayers can begin to deduct home office expenses on their tax returns during their first year of business.
You may be able to start writing off home office costs after just one year if you’re starting a new business and will use your office space exclusively for business purposes, but your situation must qualify under tax guidelines.
You will also have to deduct those expenditures at a pro rata portion based on only your income-producing activities conducted at home versus the portion used for personal reasons like sleeping and eating.
The deductible amount is then reduced by any operating expense benefits or depreciation that you might receive as a result of using part of your residence as an office.
How Much Can I Deduct as Business Expenses for Working From Home?
Do you work from home for your job? If so, there are a few specific tax deductions and business expense deductions that you may be able to take advantage of that could reduce your taxable income by thousands of dollars.
In order to qualify for these deductions and business expense reimbursements, however, you need to do things just right. That’s where a professional tax advisor comes in handy; they’ll make sure everything is above board legally (and also help make sure your business is as profitable as possible).
They won’t get everything for you—the IRS won’t let them—but they will help maximize every deduction allowable. The downside? Professional tax advisors charge $300 or more per hour. The good news?
Deductions for Specific Types of Expenses
In addition to general business deductions, you may also be able to deduct certain specific types of work-related expenses. For example, if you have a second job or work out of your home, you may be able to deduct:
mortgage interest and property taxes;
utilities (electricity and gas);
cleaning supplies for your office or workspace;
office equipment (like laptops or printers);
and repairs made to your office space.
You may also be able to deduct travel costs for going between your workplace and another location such as a client’s place of business.
Deductible Work-Related Costs
If you work at home, you may be able to deduct a portion of your rent or mortgage interest, property taxes, real estate insurance premiums and utilities.
If your employer requires you to use your own computer or telephone for work purposes and has not reimbursed these expenses, these costs are also deductible.
Any tools or equipment that are required for your job may also be deductible if they cost more than $200.
Generally speaking, anything needed for your job is considered a tool of trade and is typically deductible.
If you have employees (such as babysitters), it's important to track their hours because most employee-related business expenses such as wages paid can also be deducted from your income.
Recordkeeping Tips
Not everything you do at home is going to qualify as a tax deduction, but there are plenty of legitimate expenses you’ll be able to write off.
To begin with, if you work at least one job in your house—such as a call center where operators are required to stay on-call for emergencies—you’re entitled to deduct out-of-pocket costs associated with that job.
These include such things as paying your phone and Internet bill, buying replacement equipment (like cell phones or headsets), and general cleanup (cleaning agents and so forth).
Note that while it's not entirely clear how much should be deducted per square foot of office space, experts agree that deducting 2% of gross monthly income is appropriate.
Taking Care of Other Recordkeeping Requirements
When you work for yourself, you have a lot of freedom—but also a lot of responsibility. Keep your books and records organized to save time (and money) on tax season.
You might also want to look into getting an accountant to help you prepare your taxes—this is something you’ll likely want to do if your business starts making decent money.
You need all of your records in order, even if it’s just for internal use or keeping track of things like mileage if you’re self-employed. If there are any other deductions that apply to self-employed people, don't forget those either!
Related Content