Are you interested in finding out about tax deductions you might be entitled to?
Whether you’ve had to move for work or have transitioned to working from home over the course of 2020, you may be surprised to discover what you can claim for – and how much!
What are tax deductions?
In some lines of work, you could be eligible for tax relief on your expenses – whether you paid for these yourself, or your employer paid and you were later taxed. The kinds of things you can claim for vary, but could include commuting or mileage costs, cover for business trips and even accommodation.
We’ve put together this guide on tax relief and deductions you may be eligible for in the context of corporate lettings in London.
We’ve also shared some advice on tax breaks for working from home. Feel free to check out some of our other posts on short term rentals that may be relevant to you here.
What types of accommodation are eligible for tax relief?
The types of tax deduction you may be eligible for depend on your living arrangements.
Generally speaking, living accommodation is classified as housing, flats and apartments, holiday villas and even houseboats.
Non-living accommodation covers other types of boarding and lodging, hotels, and non-residential accommodation (such as an office or workshop).
Essentially, if you have the facilities to live domestically and meet basic needs (kitchen, bathroom etc), consider it living accommodation.
If I work from home, what is tax deductible?
Many people have asked us “what expenses can I claim when working from home?”. The answer is that if you live and work in your main home, there are a number of areas you can claim for, and working from home tax deductions for the self-employed can be considerably generous.
- Utilities: Include electricity, water and heating.
- Household bills: Covers things like broadband and phone costs.
- Other bills: For instance council tax, repairs, cleaning and redecoration.
Surprisingly, when it comes to working from home tax deductions for the self-employed, there are even more areas you could potentially claim for.
For instance, you might be able to claim back for use and maintenance of your car, if you need it for work duties (such as meeting clients or visiting suppliers). Other areas could include things such as training courses.
If in doubt, get in touch with HMRC to find out exactly what’s covered, and ensure you keep receipts for everything, in case there’s anything else you can claim for.
(Receipts are also crucial if HMRC asks to see evidence of claims. Always keep at least five years of records!)
What are the pitfalls to this type of arrangement?
Claiming back your expenses when you work from home may sound like an attractive prospect, however, there are a few things you should be aware of. First and foremost, you can’t claim for overall house expenses. For example, if you use one of your bedrooms as an office, you can claim for a portion of the tax paid on the heating, internet, phone and other costs needed to use this room, but not for the rest of the house – and of course, this also covers anything which you need for personal use, or which you may share with other members of your household.
The good news is that it doesn’t matter how many days or weeks you have this working from home arrangement – it’s likely you’ll still be entitled to a share of relief. And, if you’ve had to buy equipment to carry out your work (such as a desk or laptop), you may also be able to recover some of these costs.
HMRC’s website has a great tool for checking your eligibility, together with instructions on how to make a claim. It’s ideal if you’re looking for how to calculate work from home tax deductions.
How does it work if I have temporary work accommodation?
In situations where travel and accommodation is required for work duties, many employers will organise a hotel for one-off or short-term stay. But what if a project demands a long-term solution? In these situations, a corporate let or flat may be a better option – especially as, like the hotel scenario, the employer can usually claim this back as an expense from its own taxes.
To qualify, you'll need to retain your permanent residence and will need to prove that the rental is a better financial option than, say, commuting to that area. You can find out more through your employer or by getting in touch with HMRC. There’s more information to be found on HMRC’s website here.
What are the pitfalls to this type of arrangement?
In cases where you have ‘work’ or corporate accommodation, you'll need to ensure there’s no 'personal gain' from the arrangement – for example, sub-letting it to friends and family, or having them personally use it, if you aren’t there.
Of course, there may be circumstances where there are other considerations – for example, if there are family members of children (i.e. using the accommodation as a private residence). In these situations, the allowance would be restricted.
The other pitfall in this scenario is the length of time the accommodation is used, as this can affect what can be claimed in terms of reasonable travel expenses etc.
Also, HMRC expects your accommodation to be of the same, or a lower standard, than your permanent residence. In other words, there should be no question as to which is your primary residence, and this should be the place you live, and spend a reasonable amount of time in (so a move to rent or sell your permanent home could get you into difficulties).
So there you have it
One of the best ways you can find out about tax deductions is to get in touch with HMRC or your local council, and file a tax claim for working from home.
How Dolphin Square Lettings can help
If you need to find suitable corporate accommodation for work, you’ve come to the right place. Take a look at our full listings to see what could work for you in the capital, and enjoy all this great city has to offer while being safe in the knowledge that you could well be eligible for a tax deduction or two.