How Much Does It Cost To Work From Home?

So, how much does it cost to work from home? The pandemic gave us a once-in-a-generation opportunity to change and reimagine the ways we work. Improved technology meant that working remotely had never been easier. And recent figures from the Office for National Statistics report that between 25 January to 5 February, around 40% of working adults had worked from home at some point in the past seven days. Throughout 2022, the percentage of working adults reporting having worked from home has varied between 25% and 40%. These figures clearly indicate that homeworking has been resilient to the pressures such as the end of the restrictions and the increases in the cost of living. So with no clear upward or downward trend in the figures, team4 looks at how much it does cost to work from home? We explore the tax relief for the self-employed as well as those who are employed.

It’s too easy to just think about the savings you are making

When working from home, it is easy to forget about how much it is actually costing you. It’s all too simple just to think about the savings you are making on travelling to and from work and not eating lunch out at restaurants or paying out for takeaways or drinks from coffee shops. Home working incurs electricity, Wi-Fi and other utility costs as well as broadband and telephone expenses.

What extras do you have to pay for?

• Electricity to power computers (laptop and desktop)
• Additional heating
• Broadband
• Telephone
• Office furniture – chair, desk and stationery
• Insurance
• Rent and mortgage interest

Energy costs have been rising sharply

When considering the cost to work from home, you will need electricity to run your desktop computer and to charge a laptop. Your home will also need extra heating throughout the day, so it’s important to take into consideration that heating in the UK is extremely high at the moment. The Office for National Statistics reports that although electricity prices fell by 1% between March and April 2023, this has to be compared to a rise of 40.5% between the same two months a year ago. And although gas prices fell by 1% between March and April 2023, this was the first time gas prices had fallen since October 2020. Again, this can be compared with a 66.8% rise between the same two months a year ago.

Broadband, mobiles, office furniture and insurance

Other expenses you will need to consider are the cost of broadband and telephone charges. It’s a good idea to shop around for the best broadband package that will suit your requirements. It is estimated that in the UK, more than a third of broadband usage is used for working purposes. Well made office furniture and an ergonomically made office chair are essential expenses and don’t forget about insurance.

Claim tax relief for your job expenses

HMRC reports that you may be able to claim tax relief for the additional household costs you incur if you work at home for all or part of the week. It clearly states who and who cannot claim tax relief.

You can claim tax relief if you have to work from home, for example because:

 

• Your job requires you to live far away from your office
• Your employer does not have an office

 

You cannot claim tax relief if you choose to work from home. This includes if:

 

• Your employment contract lets you work from home some or all of the time
• Your work from home because of coronavirus (COVID-19)
• Your employer has an office, but you cannot go there sometimes because it’s full

 

Tax relief may be claimed on business phone calls and gas and electricity for your work area.

How much can you claim?

HMRC states that you can either claim tax relief on:

• £6 a week from 6 April 2020 (for previous tax years the rate is £4 a week) – you will not need to keep evidence of your extra costs
• The exact amount of extra costs you’ve incurred above the weekly amount – you’ll need evidence such as receipts, bills or contracts

You will get tax relief based on the rate at which you pay tax. For example, if you pay the 20% basic rate of tax and claim tax relief on £6 a week you would get £1.20 per week in tax relief (20% of £6).

What expenses can you claim when working from home as self employed?

• Gas, electricity and water bills
• Internet and telephone bills
• Rent and mortgage interest costs
• Council tax

Some of these running costs can be deducted as allowable business expenses when working out your taxable profit. You can claim for a percentage of your utility bills and you can also claim a proportion of your costs for rent and mortgage interest. You cannot claim for things you use privately. For more detailed information, refer to an earlier blog from team4, which is a guide to self-employed expenses.

How can team4 help you claim tax relief if you are working from home?

It was over three years ago that the pandemic transformed the way we work. Working from home certainly comes with its own financial burden, and we hope this article has explained the cost to work from home. If you are unsure what you can claim for, or you are looking to outsource your accounting operations, don’t hesitate to get in touch with team4. Call us on +44(0)1825 763378 or email info@team4bookkeeping.co.uk