Whether you have recently moved to work from home as a result of the COVID-19 pandemic or have decided to start running your own business from your home, many people do not realise some of the additional costs that they might incur as a result of this. Working from home can be a rewarding experience that allows you more freedom and even helps you save more money in the long run; however, there are some essential costs to consider that you may not have found necessary while working from the office or another location.
We’ve put together a list of some important costs to consider as a new home-based worker.
Home Insurance
Since your home is now where you make your livelihood, it’s even more important that you get it insured. If your home is already insured and you have decided to start running a business from the property, chances are that you will need to make some changes to your home insurance policy in order to reflect this; as homes where certain businesses are run are not always covered in a standard home insurance policy.
You can make changes to your current policy or shop around for cheaper cover using home insurance quotes from Quotezone. Comparing Quotezone’s home insurance quotes is an easy process - just fill in a request form online and quotes from the top providers will be displayed on the screen.
For those residing in Canada, particularly in Ontario, the scenario might differ. It's prudent to explore home insurance in Ontario to understand the coverage options available for home-based workers. Insurance providers in Ontario offer tailored policies that cater to the needs of individuals working from home, ensuring that both the structural aspect of the home and the business operations conducted therein are adequately covered. Engaging with a reputable insurance broker can provide insights into the best insurance solutions available in the region, ensuring that your home office is protected against unforeseen events.
Contents Insurance
If you’ve moved to working from home, chances are that you now have some more expensive equipment at home. This might be insured by your employer if it belongs to them, but if you have purchased it yourself for working or running your own business, you will be responsible for making sure that it is covered with the right contents insurance policy.
This is a very important cost to consider as, after all, you likely wouldn’t be able to work and earn money if you did not have this equipment, whether you’re using a PC, manufacturing equipment, laptop, smartphone or something else. Contents insurance will ensure that in the event of damage to your equipment or if they are stolen, you are paid out their value to replace them quickly and protect yourself from a serious loss of income.
Public Liability Insurance
Suppose you are running your own business from home, which involves seeing clients or customers in your property. In that case, you should get public liability insurance to protect your company should anything go wrong.
For example, businesses like childminding services or home beauty services should always have public liability insurance to ensure that they are financially protected in the event of a client being hurt or injured while at their property.
The last thing that you want is for your business to be seriously damaged by legal fees. While you may do everything that you can to protect your clients, you can never be certain that an accident won’t happen.
Inspired to work from home? Read Ten Highest Paid Jobs Working From Home and Earn More Working At Home.
Internet Access
Depending on the type of work that you are doing from home, you might find that your standard home internet package simply doesn’t cut it any longer. If you typically used to use your internet at home for standard browsing and occasional movie or TV show streaming, it might not be fast enough to cover the type of work that you do.
You might need to consider upgrading to a faster internet package that allows you to get on with working without any disruption. You should also check if your provider has a broadband usage limit. If you intend to work remotely and you transfer large files on a regular basis, you can quickly use your internet allowance.
A sudden drop in speed or inability to connect to a webpage, is often a sign that you have used your limit.
Home Modifications
You may be faced with the need to modify your home to make it more suitable for working from home long-term. For example, if you are starting your own business from home and do not have a spare room that you can turn into an office, you might consider the option of converting a garage or attic space or even building an extension onto your home in order to provide yourself with a suitable place to get work done, rather than working in your kitchen or from your sofa.
The average costs of a garage renovation for home working is in the range of £9,000 to £20,000.
Increased Utility Cost
Finally, consider the fact that when you begin working from home, your utility costs are likely to go up. This is because you’re now going to be at home throughout the day rather than at the office, and you’ll be using main utilities like gas (keeping the heating on 24/7), electricity and water.
The good news is that you can mitigate some of these costs by being more mindful about the utilities that you use. Installing a smart meter can help you track how much you are using and you can use gadgets like energy-saving light bulbs to help you use less.
Whether you’re moving your job to your home as a result of the current Coronavirus pandemic or want to start a home-based business, keep some of these common costs in mind.
Extra Costs
An employee working from home should also consider extra costs such as purchasing office furniture. If you are purchasing furniture, you might be tempted to furnish the home office space with cheap items.
While this will save money today, budget furniture might need replacing more often and be susceptible to damage. Furthermore, if you are sitting in an office chair for eight hours, you will want a good quality chair that will help you feel comfortable.
Further remote working expenses might include printer paper, ink cartridges or toner, pens, envelopes, stamps, tea, coffee, and milk.
Employee Remote Working Expenses
Expenses is a broad term describing any cost that home workers incur to perform their job. Examples include telephone call costs, specialist software or collaboration tools, stationery, furniture, and a computer.
If the additional costs are incurred purely for business, then your employer may cover these. While the information discussed here is not to be considered legal advice, HMRC state that an employer can pay you up to £6 per week, to help cover your extra bills and expenses. The expenses allowance is tax-free, so you should receive the full amount.
Claim Tax Relief on Expenses
If your company will not cover your working from home expenses, you can save money and claim tax relief of £6 per week. In England, the amount will be deducted from your taxable income and you don’t need to keep receipts to be eligible.
It is possible to claim more money you have spent for work purposes, however, this becomes significantly more complicated. Most people would need to set up a limited company and create an agreement between the company and themselves (homeowner).
Depending on how much of the home is used for the business, you may be able to claim proportionally for council tax, mortgage payments, and utilities. If you are working from home and wish to claim money for these expenses, you should seek legal advice and set up a formal contract. A mistake here might see the government consider the rent you get from your business as profit/salary, and charge you National Insurance and tax.
To claim rent when working from home, UK workers need to make a proportional calculation. If you have six rooms in your home, you need to first divide your rent by six. If you work eight hours per day, you then need to calculate 8/24 of that amount.
The Physical and Mental Cost of Working Remotely
Many businesses and employees have found working from home to be a great success during the world-wide pandemic, increasing productivity and improving mental well-being. However, home-working is not the same for everyone.
The mental cost for an employee can be high if they share a space with other flatmates or have children at home during the working day. It can also be difficult to set boundaries, so work does not encroach on the employees’ personal life.
Research from the Royal Society for Public Health, noted that only 15% of employees were working from a desk. 26% of employees admitted to working from their sofa or bed.
Almost half of the employees surveyed during the research, who spent their normal work hours in bed or on a sofa, experienced muscular problems. Therefore, employees should carefully consider ergonomics when setting up a workspace at home.
Finding the Balance
The average employer and employee have been working outside the normal mode of operation during the pandemic. In this article, we have suggested various topics for consideration, from the money employees spend on insurance and utilities to what expenses are eligible for tax relief.
Some professions adapt easily to employees working out of the office. For others, it is difficult or almost impossible to offer the same services to clients, with employees working from home.
Employers and employees should have open and honest conversations to ensure they are on the same page. Employers should consider what an employee may spend working from home and employees should think about setting boundaries to ensure home working doesn’t affect their personal life.
Home Working FAQs
Here we answer your questions on the true cost of work from home and working remotely.
What expenses can I claim when working from home?
You can make a tax relief claim of £6 per week for business expenses and reduce your cost of working from home.
What should you consider when working from home?
Consider what you may spend on utilities, furniture, and stationery. Also, think about buying a good office chair to protect your physical well-being.
What your company should pay for if you work from home?
Employers can consider expenses incurred that are solely due to working from home and used purely for business purposes.
