Welcome to this week’s musings from me on tax. I mostly write to this forum about expats and non resident taxpayers – specifically around South Africans in the UK. This week I thought I would be a BIT different and write about something almost everyone can get for free.
In South Africa we refer to it as a Home Office Allowance and it is a notoriously difficult thing to benefit from! You can only win on this one if you have ALL your paperwork correct. Of course, with Covid, virtually everyone has HAD to work from home so it might be considerably easier to make this claim this year. It would certainly help if your employer was on-sides and gave you a home office allowance on your IRP5 and a letter stating you have to work from home!
In the UK, a similar thing is referred to as “Business Use of Home”. It’s designed to allow sole traders or partners who use their home for the purposes of their trade to claim a flat rate deduction for variable household expense used in the business. These expenses are things like gas, electricity and water. If you work over 101 hours a month from home (like most of us during the Covid lockdowns) you can claim £26 per month as a deduction from your earnings. Alternatively you can claim the actual extra expense incurred by working from home.
As I mentioned, this is designed to apply to sole traders but there’s lots of ground to argue for this allowance in the 2020 environment.
Assuming you make the claim for 6 months and HMRC allow you to get away with it and you are a higher rate earner you could walk away with £62 extra in your pocket. Not exactly a big deal but it’s certainly something for nothing – just enter the claim onto your Self Assessment (which would take a few minutes) and you may just win.
For South African taxpayers it’s not quite so simple but you could also get quite a bit more out of it. In SA we take the percentage of your house allocated to your office and then take a portion of your bond interest, rates, electricity, water, levies and maids wages. It’s a lot more work but the upside is greater.
Then, you can also claim any extra costs you have to incur in order to work from home. As examples, your access to the internet – having a fiber line installed at home and the monthly cost of that, your extra telephone calls and anything else that you needed to continue to do the work that generates your salary.
These extra expenses apply to both SA and the UK so keep track of it all and it might just reward you with some cash for a decent meal with your family.
There ARE free lunches (or dinners) to be had, despite the catch phrase that there aren’t! You just need to know where to find them.
Feel free to call us if you would like some help with either your UK or SA taxes. There’s never been a better time to ask SARS and/or HMRC for a bit more!