When you’re a contractor or freelancer, you may be presented with the opportunity to work from home on occasion. This can be ideal if your client’s head office is far away, if you need to look after family or if you simply want your home comforts.
Working from home offers many benefits: a comfortable environment, greater work-life balance and flexibility – to name a few. Many businesses can also benefit from using remote workers, including saving on office rent.
Contractors and freelancers particularly enjoy working from home as it highlights the separation from their end-client – strengthening compliance with IR35 legislation. It is also popular for freelancers who work with several clients simultaneously.
Claiming expenses while working from home – is there a catch?
Working from home can come with tax implications. There are some expenses that are allowable and some that are not – and it can get quite complex.
For one, the expense must have been incurred wholly and exclusively for the purpose of the business. You cannot purchase a coffee machine for your kitchen and claim it as an expense just because you occasionally use it for client meetings.
HMRC’s Business Income Manual indicates certain expenses that can be proportionately estimated and claimed against. These include mobile phone contracts, gas and heating bills, council tax, rent, repairs and cleaning.
As you can see, this can get complicated very quickly and it may draw the attention of HMRC. Other expenses are easier to justify; for example if you have a business landline in your home office registered in your company name.
Beware of capital gains if you have a home office
You should be aware that if you have a room used solely as an office, it could reduce the capital gains relief you’re able to claim when you one day sell the property.
This is due to the fact that a home office doesn’t count as a private office and as such falls outside the bounds for receiving that tax relief.
Other expenses you can claim:
One of the benefits of operating a limited company is the variety of expenses you may claim. These will reduce your tax liability, thereby increasing your overall take home pay.
Other expenses you could claim through your company include:
- Employee wages
- Pension contributions (through an approved scheme)
- Employers’ National Insurance Contributions (NICs) payable on employee salaries
- The cost of travel to a ‘temporary workplace’ not considered an ordinary commute. No claims are allowable when you are engaged at the same ‘temporary workplace’ for over 24 months.
- Subsistence costs (accommodation, food, laundry etc.) whilst away from your contracted place of business for work purposes only – if outside IR35
- Mileage allowance (if using one’s own vehicle) of 45p/mile for the first 10,000 miles, and 25p/mile thereafter. For bicycles, you may claim 20p/mile
- Training course fees – if the skills and training are directly relevant to the business.
- Stationery, postage, and printing costs for business purposes
- Business insurance, such as Professional Indemnity Insurance, Employers Liability, and Public Liability
Visit our FAQs for an extensive list of claimable expenses.
We can help with business expenses
Claiming expenses incurred while working from home can be complex, but that’s what we’re here for. Bluebird Accountancy’s modern service comes complete with personal tax planning and advice. This includes advice on which expenses you can and cannot claim through your limited company.
Our accountants can explain the ins and outs of claiming expenses while working from home, and give you the tools to maximise working as a contractor or freelancer.