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Working from home tax relief: A guide for business owners

March 30, 2023The coronavirus pandemic saw working from home become commonplace, with many businesses taking steps to make remote working possible during lockdown.To help small business owners and their employees with the additional household costs that come with working at home, working from home tax reliefs were expanded to accommodate those new to remote working.As lockdown measures relaxed and more returned to the office, hybrid and remote working became a permanent introduction for many businesses — and as a result, HM Revenue and Customs (HMRC) has updated the legislation surrounding working from home tax reliefs, who is eligible to claim and how much tax relief they’re entitled to.In this guide, we’ll be diving into working from home tax reliefs for business owners, the eligibility criteria for working from home tax reliefs, and how you can make a claim.

Who can claim working from home tax relief in the UK?

As of 6th April 2022, your employees can only claim working from home tax reliefs if you met the eligibility criteria put in place before widespread lockdown.To qualify for working from home tax relief in the current tax year, your employees must:

Be required to work from home by their employer (you)Have a dedicated home office or workspace in their homeIncur extra expenses as a result of working from home, such as heating, electricity and broadband costs

Who can’t claim working from home tax relief in the UK?

Your employees can’t claim working from home tax relief for the current tax year if:

They choose to work from home, but it isn’t a requirementThey don’t have a dedicated workspace or work area at home used solely for work purposesThey don’t incur any extra costs as a result of working from home

Working from home tax relief for business owners

As a business owner yourself, you may be wondering if you can claim working from home tax relief yourself. In short, you can claim working from home tax relief as a business owner — but what you can claim depends on whether you’re a limited company director or sole trader.

Working from home tax relief for limited company directors vs. sole traders

If you’re a limited company director, you can claim tax relief on certain expenses related to working from home, such as utility bills, broadband and office supplies.The expenses incurred must be wholly and exclusively used for business purposes, and directors cannot personally claim tax relief on these expenses. Instead, they’ll need to be claimed as a tax deductible expenses by the company.Self-employed sole traders, on the other hand, can claim the same expenses as employees on the basis they meet the criteria outlined above.

Can I claim for previous tax years?

Yes. You can backdate working from home tax relief for up to 4 years if you meet the eligible criteria and have records evidencing your claims.If you worked from home during the 2020/21 tax year, you have until 5th April 2025 to apply for a tax rebate. Similarly, if you worked from home during the 2021/22 tax year, you have until 5th April 2026.Most sole traders and limited company directors who worked from home during this period will be able to make a claim, as the scope for the working from home tax relief during these 2 years expanded to help those dealing with the extra costs that come with working from home.

What can I claim as working from home tax relief?

If you’re confident you meet the criteria to work from home, you and your employees can claim back on the following expenses:

Utility bills, such as gas, electricity and waterInternet, including broadbandPhone bills if you use your mobile phone to make work-related phone callsOffice equipment if purchased specifically to make working from home possible. If equipment is loaned to you or your employees from the company, you and your employees cannot personally claim tax relief, but you can record it as a tax-deductible expense for the company.Stationery and office suppliesOther work-related expenses, such as professional subscriptions or the cost of travel to and from a temporary workplace

If you’re a self-employed sole trader, or if you have employees looking to claim working from home tax relief, you can claim tax relief on a proportion of your household bills, including council tax and mortgage interest or rent.You can also claim tax relief on equipment bought for business use in your home, such as computers, monitors or printers.Limited company directors can also claim working from home tax relief for certain expenses, but if you do so your company won’t be able to claim tax relief on the same expenses. It’s also worth noting that if the company provides any equipment for directors or employees to use at home, you and your employees cannot personally claim tax relief for them.

What if I use work equipment for personal use?

To claim the full cost back as a tax relief, items must be used wholly and exclusively for business purposes. However, if you’re working from home, this isn’t always possible, especially if you already owned the equipment when you started working remotely.Here’s where you can claim partial tax relief on working from home expenses. To make your claim, you’ll need to work out the portion of your bills that is dedicated to professional use.Take for instance, you have a mobile phone bill of £100. If 50% of your phone’s usage is dedicated to making work phone calls, you’ll be able to claim back £50 of your bill as an allowable expense.

How much can I claim in working from home tax relief?

The amount of tax relief you can claim depends on whether you’re:

Calculating the exact amount of extra costs you’ve incurred above the weekly amount, with receipts, bills and contracts providing evidenceUsing the flat rate of £6 a week

Calculate extra costs

If you opt to work out the extra costs you’ve incurred exactly, you’ll need to find out the proportion of the cost dedicated to business purposes and apply the rate of tax you pay to find out how much you can claim.For example, you’re working from your home office, which is one of the 4 rooms in your house, and your electricity bill for one month is £80.To work out how much you can claim back, you’ll first need to work out how much of your bill goes towards powering that room. As your home office accounts for 1 room of the 4, you’ll need to find 25% of your bill, which in this example would be £20.Next, you’d need to apply the Income Tax rate you pay to work out the tax relief you’re entitled to. The tax bands in England, Wales and Northern Ireland for the 2023/24 tax year are as follows:In Scotland, the 2023/24 Income Tax bands are as follows: If you pay the 20% basic rate of tax, in this example you’ll be able to claim £4 in tax relief for that month (20% of £20).However, finding the exact proportions of certain expenses can be tricky, so to make sure busy business owners aren’t missing out, HMRC offers a flat rate of £6 a week to help business owners with their expenses. If you’re claiming for tax years before 6th April 2020, the flat rate for these years is £4 a week.For example, if you’re a basic rate taxpayer and claim tax relief on £6 a week, you’ll get £1.20 per week in tax relief (20% of £6).

Does my tax code change if I work from home?

Working from home may impact your tax code, but it depends on your specific circumstances.Your tax code determines how much tax is deducted from your pay, and is based on factors such as your income, tax-free allowances and any benefits you receive. With this in mind, if you’re a limited company director claiming for the current tax year, you’ll get tax relief through a change to your tax code.It's important to note that if you receive taxable benefits, such as a company car or medical insurance, working from home could cause you to exceed the threshold for certain benefits, potentially affecting your tax code.

How can I claim working from home tax relief as a business owner?

If you’ve got your receipts and know how much you’re entitled to, you can start to make your working from home tax relief claim.To do this, you can either file a Self Assessment tax return, or use HMRC’s online service to make your claim. If making your working from home tax relief claim using HMRC’s online services, you’ll need:If claiming through your Self Assessment tax return or through HMRC’s online services, you’ll need to include all eligible expenses and supporting records, alongside the calculations you’ve used to work out the amount of tax relief you’re claiming.If your claim is successful, you’ll get a reimbursement or an adjustment to your next Income Tax bill.