If you are a sole-trader who works from home you can claim your heating as a running cost for your business and save on your tax bills.
Finance experts are advising self-employed individuals and those working from home that they might be able to claim a portion of their heating and household bills against their tax bill. If you’re a sole trader operating from home, you can list your heating as a running cost for your business, potentially reducing your tax bills.
Similarly, you could be eligible to claim tax relief for additional household expenses if you’re required to work from home for all or part of the week. However, there are strict eligibility criteria for making a claim, with details provided by HMRC here.
Tax relief can be claimed if you’re required to work from home, such as if your job necessitates living far from your office or if your employer doesn’t have an office. However, you cannot claim tax relief if you choose to work from home, including if your employment contract allows you to work from home some or all of the time, or if your employer has an office but you can’t go there sometimes because it’s full.
You can only claim for work-related expenses, such as business phone calls or gas and electricity for your work area. Claims are made through Self Assessment tax returns, which must be filed by January 31. Notably, you can claim for this tax year and the four previous tax years.
The tax rules specify that workers cannot claim for items used for both private and business use, such as rent or broadband access. You can either claim tax relief on £6 a week or the exact amount you’ve spent. Mike Parkes, technical director at GoSimpleTax, explained: “It is possible to claim for electricity and gas bills – to do this, self-employed people need to reliably and accurately work out the proportion of business and personal use.”
For example, say there are five rooms in the home and one is used as a full-time office, studio or place of work, with a yearly electricity bill of £1,000. Dividing that by five (presuming the rooms are of reasonably equal size) means it would be possible to claim £200 as an allowable expense.
Mike Parkes, technical director at GoSimpleTax, said: “It is possible to claim for electricity and gas bills – to do this, self-employed people need to reliably and accurately work out the proportion of business and personal use. For example, say there are five rooms in the home and one is used as a full-time office, studio or place of work, with a yearly electricity bill of £1,000. Dividing that by five (presuming the rooms are of reasonably equal size) means it would be possible to claim £200 as an allowable expense. “
Mr Parkes explained that bills such as internet or telephone use at home can be divided in a similar way to heating bills and listed as a tax expense. Alongside this method of calculation, if you work 25 hours or more from home a month, you can claim a flat rate under simplified expenses which ranges between £10-£26 depending on how many hours you work.
Mr Parkes said: “Self-employed people claim allowable expenses via the annual Self Assessment tax return, through summarising all of the allowable expenses for the tax year. The total is then taken away from the taxable income to find out how much Income Tax and National Insurance is owed. The quickest and easiest way to record allowable expenses is to regularly enter details of costs and income into accounting software, so all of the expenses are up-to-date and conveniently summarised.”
If you still need assistance with your tax return, you can use this work-from-home tax allowance calculator to work out how much you can save on household bills.