A summary of the different rules, for different types of tax payer in claiming tax relief on use of home.

Different rules apply depending on whether you are an employee or self-employed or a director when claiming tax relief against income or profits for the costs of using your home for business purposes. 

 

Sole trader

Employee

General rule

May claim all business expenses or if an expense is part-business/part-private may claim an identifiable proportion of that expense.

See Working from Home

May only claim expenses if incurred wholly, necessarily and exclusively in performance of employment duties. This excludes expenses which are part-business/part- private.

Where home working is undertaken by personal preference no claim is possible.

See Employees: Home Working

What type of expenses

Light and heat, mortgage interest, council tax, insurance, utilities, broadband, telephone and other running costs.

See What expenses can I claim?

Claims limited to metered use of light and heat and itemised telephone calls. Claims for other costs may be possible depending on the nature of the employment.

See: Employees & expense claims

 

Instead of claiming actual expenses are there any HMRC approved allowances?

Fixed rate allowance by hours

£4 per week or as agreed by employer

Read more

Working from home (self-employed)

Fixed rate toolkit

Use of home as office calculator

Working from home (employee)

Broadband

 

Top tips and pitfalls 

If an employer reimburses an employee’s expenses under a homeworking agreement there will be no tax liability for the employee provided that the expenses qualify for relief under the general rule. This strategy is more beneficial for the employee because the employer bears all the costs. 

Running your own company?

A company director of an incorporated business may enter into a licence agreement with the company for non-exclusive use of an office in the director’s house. This rental income can then be set against a proportion of the household expenses on the director’s personal tax return. 

See

Pitfalls

Capital Gains Tax issues to consider where any part of a home is used exclusively for business. You may not claim Rent a room relief where a room is rented to a business.

More

You might also like:

Tax relief on converting part of a home into an office

Licence for non-exclusive use of a property

Property profits and losses

 


 

Looking for tax advice or a second opinion? Contact our Virtual Tax Partner helpline.

 

 

 

 

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