If you are part of the majority of e-commerce entrepreneurs that work from home, regardless of the pandemic, you need to read this and make sure you are claiming all the relevant work-from-home expenses.
E-commerce entrepreneurs routinely work from home, either to build a supplemental income or as their primary business. Regardless of the legal entity you choose for your e-commerce business, there are allowable work-from-home expenses that you can and should claim.
What are work from home expenses?
Work from home expenses cover all the day-to-day costs you incur from conducting your business activities at home. These are usually calculated in full i.e., how much was the bill, then adjusted for how many rooms you use in the house, and how many hours you worked.
Electricity bill – £1,000 per annum
Rooms used – 1/10 of rooms in the home
But you spend 40/168 (23.8%) hours a week working at home so:
£100 x 23.8% = £23.80 is allowable per year for electricity
What is included in work from home expenses?
You can claim for anything that you can show has increased through working from home and is strictly related to the running of your business. We highly recommend checking your work from home expenses with an e-commerce accountant to ensure you include everything you can, but the following list is a good place to start:
- Electricity – it’s a safe bet that you are using more electricity for laptops, phone charging etc.
- Broadband – this is a tricky one. If your existing broadband is a fixed price and sufficient for your needs, it is not allowable. If you are on a data-capped plan and incur further costs due to your business needs OR have to upgrade to a business plan, it is allowable.
- Phone – again, this may not be relevant to you but should be considered. If you incur costs on your landline for business phone calls, they may be allowable. If you are on a fixed price plan or are making calls within your mobile plan, they are not.
- Heating and/or air conditioning – with British weather a little on the unpredictable side these days, you can claim work from home expenses for heating costs or air-con.
- Home insurance – this is a big one for e-commerce business owners. If you are storing goods at home, you will want to get this added to your home insurance, and as such, you can claim the extra expense in your tax calculation.
What is not included in work from home expenses?
You can’t claim anything back for costs that would be the same regardless of your working status. The following is a list of expenses that you are likely unable to claim, but it is not exhaustive:
- Rent or mortgage – these are only allowable if the property is rented purely for business purposes so is not a work-from-home expense.
- Water – water bills are allowable as a work from home expense, but e-commerce entrepreneurs are highly unlikely to incur a material rise in their bills from working at home.
- Council tax – this won’t be affected by your e-commerce business so is not allowable.
We have previously discussed the amazing flexibility that your e-commerce business can give you to work from anywhere in the world. For purposes of claiming work from home expenses, your “home” can be wherever you reside as long as you are responsible for the bill. If you are working from a rented property in a far-flung region or moving to a different locale every 2 months, you can still claim so long as your name is on the bill.
E-commerce entrepreneurs face a gauntlet of expenses, allowable and non-allowable, from work from home costs to international VAT. We want to make sure you are paying the right amount and that means claiming everything you are due. If you want to make sure you are claiming all you should, please get in touch with our team of experts.
The best time to act is now.