Cutting the costs of working from home - Gareth Shaw

Gareth says…

According to British Gas, a high user of gas and electricity pays £1,400 over the course of the year. And following the Government’s announcement last week, the millions of us who are now forced to work from home are facing the prospect of soaring bills.

It’s rare that working people spend seen days a week with the heating on full blast – perhaps when you’ve been poorly, but not for several months. So you can expect that your usage is going to increase dramatically.

If you haven’t switched your energy supplier or tariff recently, there’s a good chance you could save a lot of money. That’s because you will probably be on a standard or default tariff.

These prices are capped, but tend to be the most expensive, as you’ve been moved on automatically to a default deal.

Which? research suggests you could save £330 a year by switching suppliers – and with 11 million people on default tariffs, there’s plenty who could benefit.

To maximise your savings, you should pay for your energy bills by direct debit, and select online billing. Small changes can help – switching to LED light bulbs, for example, could save you £180 a year.

If you’re struggling to meet energy bills, there are a number of home energy grants and financial support available. Cold weather payments are made to households that receive certain benefits, and help pay for extra heating costs during very cold weather, while the winter fuel payment is automatically paid to those who receive the state pension.

However, it’s worth understanding that employees of companies working from home can claim a tax rebate on some of what they’ve spent on some bills.

You’ll only be able to claim for things that are solely used for work purposes, such as excess costs for gas and electricity, or business calls on your phone bill. Rent, broadband, council tax and water can’t be claimed for as they are used for both business and privately.

How do you know how much of your energy is being used for work? It’s tough, and so HMRC allows you to claim a flat rate of £6 a week to cover the extra expenses.

You can either claim through Pay As You Earn, where your rebate will be paid via your tax code over the following tax year, or by filling out a self-assessment tax return if you normally complete one.

If you don’t, you just need to fill out a P87 form and send it to HMRC with your National Insurance number and PAYE reference. You can even claim this tax relief if you’re working from home part-time.

You could ask your employer to claim it for you – but in the current situation, that may not be possible.

If you’re self-employed, you can claim for a much wider range of expenses – such as cleaning, council tax and even mortgage interest. This is based on the proportion of your home being used for work purposes.

Your claim needs to go through the self-assessment process, and will be deducted from your revenue before your tax bill is calculated.

The deadline to submit for the 2019-20 tax year, ending on April 6, 2020, is January 31, 2021. To claim for the period covering the latest home-working mandate, you’ll have to submit in 2022.

Not strictly energy related, but it’s also worth looking at how much you pay for car insurance. If you used a car to commute to work, you would have insured it for commuter use. Speak to your insurer and ask it to switch the policy to social use. This could reduce your premiums significantly.

If you’re not using your car at all, you could declare it off the road, cancelling your cover and getting a refund on car tax. It can’t be left on public roads and you’ll need to get a Statutory Off Road Notification.

Gareth Shaw, Head of Money at Which?

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