Working from home – tax relief for home-office expenses extended to 2021/22

If you’re self-employed

If you’re self-employed and working from home, you can claim tax relief for a business expense if it is “wholly and exclusively for the purpose of the business”. There are two ways of claiming relief:

1. Use HMRCs flat rate deduction based on the number of hours worked per month. There is no need to provide any records. The relief is as follows:

• 25 -50 hours a month - £10
• 51 -100 hours a month - £18
• 101 hours or more a month - £26

2. If your actual costs of working from home exceed HMRC’s flat rates and you can demonstrate that these have been calculated on a “fair and reasonable” basis, then you can claim relief for the higher amount.

You can claim a proportion of the following costs (not all of which are available to employees):

• Mortgage interest (not capital repayments) or rent
• Council tax
• Light and heat
• Telephone line rental/broadband costs
• Household insurance
• Household cleaning costs
• Household repairs 

How do you calculate the expenses?

You need to calculate a proportion of household expenses based on the number of rooms in which you work, compared to the number of rooms in the house. You must then calculate on a fair and reasonable basis, the business use of that particular room per week. This can be done in a number of ways and will depend on your personal circumstances; a common method used is to calculate the business use of the fixed costs based on total hours in the week, and variable costs based on the total use of the room.

As an example, to work out the annual allowable cost of working in one room out of four, seven hours a day, five days of the week (35 hours), with another two hours a day, seven days of the week for personal use (14 hours):

Total hours used in the week = 49 hours (35 hours + 14 hours) *

Total hours available in the week = 168 hours (24 hours x 7 days) **

a) Multiply variable expenses by 1/4 to calculate the cost per room 

b) Multiply result in a) by 35/49 for the variable costs (business hours over total hours used) *

c) Multiply fixed expenses by 1/4 to calculate the cost per room 

d) Then multiply result in c) by 35/168 for the fixed costs (business hours over total hours available in the week) **

e) Add the two resulting figures in b) and d) together to calculate the total deductible expenses

Depending on the circumstances, the claim can be made online, on your Self-Assessment Tax Return, or if you have your National Insurance number and a bit of patience, you can call HMRC. 

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