Since the start of COVID-19 working from home has gone from being a bit of a taboo subject to the norm, with many (if not all of us) now working from home. So you’re going to start to incur some costs, but as a freelancer or contractor, are any of them claimable?
In this blog we reveal what you can and can’t claim for, and why if you’re unsure it’s always best to check with your accountant beforehand.
What are you able to claim for?
There are a number of expenses you’re able to claim for. So long as you’re able to demonstrate that those expenses were a direct result of you having to work from home due to the COVID-19 pandemic, and that they’re imperative to the running of your business, you can claim for:
In a bid to support those working from home, the government announced a temporary tax and National Insurance (NI) exemption on the purchase of home office equipment, from June 11th onwards. This includes items such as desks, chairs, laptops and computer accessories, and will run until the end of the 2020/21 tax year.
If you’re contracting or freelancing through your own Limited Company you will of course already been able to claim tax relief on home office equipment. But if you’re a sole trader or using an Umbrella company, this is a new benefit of having to work from home. Always speak to your accountant or Umbrella company before any purchases, to ensure you’re able to claim.
Phone and internet usage
Sadly the whole of your phone contract cannot be claimed back as an allowable expense, only the specific costs of calls which are demonstrable as exclusively for business use only, can be claimed.
If you have a second mobile phone contract that’s purely used for business, you’re able to claim for its total cost, so long as the phone number and bill is attributed to and paid for by a business account.
You’re able to claim for internet access, so long as you’re able to prove your connection is used primarily for your business. The contract must be in your business’ name and paid for by your business account. If you only have one internet connection at home then HMRC will class this as your personal connection, and not for business use, as it’ll be too difficult to distinguish between business and personal use.
Computer / laptop cost
For it to be claimable, should you purchase a computer or laptop it must be through your business bank account. If your business is claiming for computers on the Flat Rate VAT scheme, you’re only able to claim the VAT if capital asset expenditure exceeds £2,000 on any single invoice.
The cost of any computer or laptop you purchase will be for use over a number of years, therefore it’ll be capitalised for the purposes of your accounts and depreciated over the course of its lifespan. Your business will also be entitled to Capital Allowances, meaning you’ll receive a reduction in your corporation tax liability during the year of purchase.
Transforming your home into an office
If your home is rented, you may be able to claim tax relief for the time you spend working there. This is subject to your home office only being used for work, as the amount you can claim will be proportional to the size of your designated work area.
So long as you’re claiming for the hours it takes to complete your client’s work (and not the day-to-day tasks of running your business), you’ll be able to submit an enhanced use of home as office claim. This means you’re able to claim for a portion of your rent and household bills to the time you spend working in your home office, and reimburse this cost to yourself from your business without any personal tax implications. Your Corporation Tax liability will also be reduced, as this is classed as a business expense.
You have two options when it comes to claiming back expenses when working from home, either by using the enhanced use of home as office claim or the flat rate claim.
The flat rate claim is the easiest of the two, as it’s based on HMRC’s allowances for the additional costs incurred from working from home. You won’t need to save any receipts, and you’re able to claim up to £6 per week, £26 per month or £312 per year. This amount can be claimed as claimable expenses alongside any other claims, so long as the total does not exceed £312.
Where to get advice and support when it comes to working from home
No one likes nasty surprises, especially when it comes to business expenses and spending money. That’s why it’s always advisable to consult about your decisions with a specialist accountant, who will be able to provide advice and support on your business purchases, before you take the leap.
Whether you’re a freelancer, sole trader or Limited Company contractor, get in touch with us here at Taxevo today. We’ll soon let you know what you can claim for!