Working From Home Expenses For Limited Companies
With the lines between our professional and personal lives becoming increasingly intertwined, the concept of working from home has taken on a whole new meaning. For limited companies, this shift brings not only convenience but also unique opportunities for tax optimisation. In this article, we’ll unravel the intricacies of claiming working from home expenses for limited companies, arming you with the knowledge to make the most of available allowances.
From the basics of tax-free allowances to the nitty-gritty of accounting for additional costs, we’ll provide practical insights to navigate this new work era with financial savvy. Every pound saved on allowable expenses is a pound that can be reinvested into your business’s growth!
So, whether you’re a small business owner looking for some basic bookkeeping and accounting services for the day-to-day financial management of your business, or a larger business seeking more complex support that requires the expertise of an accountant, Joanna Bookkeeping offers a comprehensive range of tailor-made accounting and bookkeeping services. We support clients across the UK and our Oxford-based accounting team is always here to offer help and support.
Let’s dive into the working from home expenses for limited companies.
Working from Home Expenses for Limited Companies: Tax-free Allowance
One of the most straightforward benefits of working from home is the tax-free allowance provided by HMRC. This allowance allows you to claim up to £26 per month without the need for extensive paperwork or meticulous record-keeping. Not only is this a tax-deductible expense for the company, but as a director, the reimbursement is also tax-free.
Working from Home Expenses for Limited Companies: Actual Additional Costs
For those who primarily operate from a home office and believe their business-related expenses surpass the standard allowance, a different approach is required. This necessitates diligent record-keeping of bills and receipts to substantiate the higher costs incurred. However, it’s crucial to remember that only expenses incurred wholly and exclusively for business purposes are eligible for corporation tax deductions.
For instance, costs like electricity must be proportional between personal and business usage, with only the latter being claimable. Gas, electricity, and water expenses (if a metre is employed) are legitimate claims. Conversely, council tax, rent, mortgage interest, and fixed-rate water charges aren’t eligible, as they are considered irrespective of home-based work.
Another popular working from home expense for limited companies is phone charges. Navigating the scenario with phone expenses hinges on discerning a distinct business component. Fixed fees, for example, are typically non-deductible. Yet, if supplementary charges specifically relate to business operations, these can be claimed. Consider establishing a separate telephone contract for business purposes, drawing funds from the company’s bank account.
Regarding broadband costs, it’s vital to note that if the service was initially procured for personal use, it may not be considered an allowable expense. Exceptions may apply if a discernible supplementary charge for business-related services is reflected on the bill.
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While it’s tempting to allocate a room exclusively for business activities, it’s advisable to maintain flexibility in its use. Using a room solely for business purposes can have implications on capital gains, particularly if you plan to sell your home in the future. Keeping the space versatile for non-business-related activities is a prudent approach.
Understanding and maximising working from home expenses for limited companies involves a nuanced approach. By leveraging available allowances and ensuring meticulous record-keeping, businesses can effectively manage their costs and tax liabilities in this evolving work landscape. Remember, seeking professional advice from a qualified accountant or tax advisor is always a wise move to ensure compliance and maximise benefits.
At Joanna Bookkeeping, there are a lot of ways we can help to support your business. If you want to avoid getting stuck in red tape and make sure everything is done correctly from day one and beyond, then let us show you how! Book an initial call with our Oxford accountant to see how we can help.
Frequently Asked Questions
As a limited company director, you can claim working form home expenses that are wholly and explosively for business purposes. Anything where you can’t identify a business element is disallowable. You can claim a business proportion of gas, electricity and water. But water can be claimed only if you’re not on a fixed charge. Additionally, you can claim phone expenditure and in some cases broadband. If you work from home all the time or quite often, it’s worth considering if it’s better to have a separate phone line and broadband only for the business purposes. This way you can claim full costs to minimise your corporation tax bill. Otherwise, you need to calculate the actual business costs.
It depends on whether you want to use a tax-free allowance available for limited companies or actual costs of your working from home expenses. The tax-free allowance is £26 per month. You don’t need to keep records to claim it. The actual cost can be higher than this especially if you work from home quite regularly. The actual cost of working from home expenses will depend on the actual bills and a business usage and can be different for each company.
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