COVID19 has seen an upsurge in working from home. Early indicators suggest that most employers will continue to support remote working, to some extent, as the UK returns to normal. Now, therefore, seems like a good time to look at the financial realities of working from home. With that in mind, here is a quick guide to what you need to know.
There is a temporary tax break in place
Last financial year, the government introduced Working From Home tax relief to help people forced to work from home due to COVID19. You can claim it as long as you were forced to work at home for at least one day in that tax year. You cannot claim it if you chose to work at home. The government has confirmed that the same relief will be available this year.
If you have to self-assess tax, you can put in your claim with your self-assessment. Otherwise, you can put in a claim at a dedicated government microsite. The amount you can claim depends on your tax status. It can be anything from £62 and £140. The relief will be rebated against the tax you pay rather than given to you directly in cash.
Working from home will probably raise your household bills
If you’re working from home as an employee, you’re probably doing administrative type work so you’ll be running a computer. You’ll also need lighting for at least part of the year. You’ll definitely need water (for bathroom breaks and probably drinks). You’re very likely to need heating and cooling, to remain comfortable.
You might also want to upgrade your internet connection and potentially have a backup connection. If you’re planning on storing expensive equipment then you may need to increase your home insurance. Remember, even if your employer’s covering their own equipment, the fact that it’s in your home may make your home more of a target to thieves.
If you’re planning on treating yourself to a garden office then that will almost certainly have implications for your insurance. That said, it may also add value to your home.
Working from home will cut your travelling costs
Of course, the big saving in working from home is generally the travelling costs. In fact, for some people, the saving on travelling costs will more than counterbalance the extra home-running costs. What’s more, you save the time you would have spent on travelling and this too has a value.
Working from home may also save on your food, drink and entertainment costs. If you were in the habit of just buying convenience food and drink then cooking your own at home can save you money. It could also improve your diet. If you were in the habit of regularly heading for drink after work, then working from home can save you even more.
Depending on your habits, you might also be able to save money by avoiding the temptation to “impulse shop” or go out for “treats” near your office.
Working from home can lead to other adjustments
If working from home becomes a major part of your life, you may find that you end up making more significant adjustments. For example, you may choose to invest in home-gym equipment rather than paying for gym membership. This would result in an upfront expense but would probably save money over the long run.
These adjustments could have a wider impact on both your personal life and your professional life. For example, gyms are often a way to meet people as well as a way to get exercise. It’s therefore advisable to think carefully about the direct and indirect repercussions of making these lifestyle changes. You might want to allow yourself a budget to counterbalance any negative effects they have.
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