As we continue to embrace the working-from-home culture, you may be wondering how you can make the most of your work-from-home allowances, especially if you’re a director of a limited company or a sole trader.
Working From Home Allowances: A Brief Overview
Before diving into the nitty-gritty of maximising your claims, let’s take a quick look at what working-from-home allowances are. Essentially, they are tax reliefs or deductions you can claim if you use your own money for costs that you must incur for your job and you only use these things for work. These could be costs related to heating, electricity, or even broadband bills.
Claiming as a Director of a Limited Company
If you’re a director of a limited company, the company can pay you a tax-free allowance of £6 per week (£26 per month) without the need for any justification. If you believe your costs are higher, you can claim more, but you will need to provide evidence of the additional costs.
It’s worth noting that this allowance is not considered a benefit in kind, so it won’t affect your personal tax position.
Claiming as a Sole Trader
As a sole trader, the process is a little different. You’re able to claim a proportion of all your household costs based on how much of your home is used for business and how often. This can include a proportion of your utility bills and internet costs.
You can calculate this by determining the number of rooms in your house, identifying how many of them you use for business, and figuring out what percentage of the time they’re used for business purposes.
Alternatively, HMRC has a simplified expenses system, where a flat rate is used depending on the number of hours worked from home each month. For 25 to 50 hours, it’s £10 per month; 51 to 100 hours, it’s £18 per month; and for 101 hours or more, it’s £26 per month.
Maximising Your Claims
Here are a few tips to maximise your working from home allowances:
- Keep Track of Your Expenses: Maintain records of all your expenses. This includes not just the big-ticket items but also the small ones. They can add up!
- Use the Right Method: For sole traders, choose the calculation method (actual costs or simplified expenses) that gives you the highest claim.
- Don’t Forget the Little Things: If you use your home phone or mobile for business calls, you can claim the business proportion of the bills.
Remember, every business is unique and the above is only a guide. It’s always best to speak with your accountant to ensure you’re maximising your claims and staying within HMRC rules.
Working from home can be a great way to save time and money. With these tips, you can hopefully also make it a little more tax efficient too.
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