Does working from home really save you money?

There are a lot of financial benefits that come to mind when you work from home rather than commuting to the office. With the average Brit saving £55 per week working from home, this gives you a monthly chunk to invest. But are you saving as much money as the average?

Working from home has many benefits, it saves you time, money and stress. But saving on transport fees, food and more can easily save upto £50 a day for high spenders. If you cut travel costs, socialising and other expenses that you would do working at an office you could easily save £500 a month! That is £500 a month that you can invest, to grow your wealth and invest in your future.

Working from home is the ‘new normal’ for nearly half (49%) of workers in the UK. The Office for National Statistics showed £157 billion was saved over the the first lockdown back in Spring 2021 with the average employee saving £495 a month working from home. 

Whilst some people are saving money due to physically not being able to spend it in shops due to various lockdowns, others have adopted a new frugality that comes with the uncertainty of a global pandemic. A survey by Hargeaves Lansdown found people are likely to stick with this shift with 32% of people saying they would go out less in future, 31% cutting back on impulse buying, 30% cutting on clothes and 15% reduced spending on food during the day. If you have accumulated from accidental savings, what could you do with the money? We recommend investing it

How are you saving money?

  1. Commuting
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This might be the most obvious expense you save on when shifting to working from home. If you drive to work you can save on fuel, maintenance and running costs. Or if you use public transport, not having to get the tube everyday or that occasional Uber really adds up! When your commute is less than 10m there is no need to splash out on transport. Some people have even sold their cars to save on that expense, after all, if you are not using it why pay for the running costs. 

  1. Wardrobe
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One of the best luxuries about working from home is the shift to more casual dress. Swapping that tie and shirt for a nice t-shirt might not seem like a money saving hack but believe me, it adds up! Think about the cost of smart shoes compared to your slippers or the dry-cleaning costs you will save on. People have also been more likely to sort-out their wardrobes during the pandemic auditing what you’ve already got meaning you are less likely to buy new items. Having retail outlets closed for a large portion of the pandemic has also helped curb the likelihood of spending on clothes. Oh, and not to mention how much you are saving by doing DIY haircuts. Looking good has never been less important. 

  1. Food
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When you have to commute to the office it is easy to pick up a nice coffee en route and to go to a cafe on your lunch break. £3 on a takeaway coffee, £8 on a bougie sandwich and that one or two beers after work at £6 a pop easily add up, but is also very easy to do. If you tot up your coffee spend alone, a daily coffee can cost you £3000 a year! But during the pandemic with everything shut, and their no temptation of being in close proximity to expensive food and drinks you can save a hell of a lot. Not only do you cut down on eating and drinking through the workday, with more and more people starting health kicks during the pandemic you can cut back on ready-meals, fast-food and takeaways that are typically high in salt and fats to slims your waist, but also trim your outgoing costs. 

  1. Childcare and dog walkers
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A huge expense that parents experience is childcare for small children. If both parents work, childcare is almost unavoidable and is an expense that can really put a dent in earnings. Given the reduced childcare opportunities and requirement for home learning, looking after your own kids (whilst exhausting) can save you a lot of money! Not paying for professional childcare, like a nursery, after school club or nanny, whether it’s your decision or not, is a great way to save money and working from home means you have more chances to bond with your kids and be more involved in their learning. 

While not as expensive as childcare, dog walkers can cost a small fortune. Dog Walking or doggy daycare services can be expensive, especially if you are working long hours. But with the shift to working from home your furry friend can snuggle up to you for free! Although we can’t promise you’ll be as productive with a pet to distract you. 

  1. Tax breaks

New working from home tax breaks such as a government allowance and home office expenses can work wonders for your wallet. If your employer doesn’t pay for your new desk, chair or monitor you can claim tax relief through a P87 form. Anything that is a home office essential can fit into this scheme, including travelling for work (excluding commuting), upto a total of £2,500 a year.  Most workers in the UK can claim tax relief off the government! Anyone who has been made to work from home since April 2020 is eligible to claim tax relief off HMRC. 

Worked from home in the UK? You can claim £60 – 125 tax relief

In October, HMRC launched a new microservice meaning that anyone working from home, even for ONE DAY, could automatically get the whole year’s tax claim for working from home. This sounds too good to be true right? But after checking everything was legit, we found it really is worth it to claim this tax relief!

Martin Lewis, money-saving expert, contacted HMRC to receive this quote: “We recognise that the working-from-home situation is very fluid this year, so we’re accepting claims for the full year’s expenses. That includes even if people have only worked from home for some of the year, to avoid needing to contact us if you have to work from home again.” This essentially means the HMRC are willing to give away a year’s tax relief for people working from home as little as one day to save on processing costs. 

The tax relief covers increased costs for working from home, e.g. heating and electricity that wouldn’t usually be expected if you were out of your home and in the office. An average energy bill last year cost £1,254 equalling £3.50 a day, demonstrating the large cost of powering your home. But due to the shift in working from home due the coronavirus pandemic, a lot of Brits have been forced to work remotely. This tax relief scheme has always been around but has only seen a higher profile this year after the launch of the HMRCs microservice. 

So how do they put a price on working from home costs? Electricity and heating costs for working hours can be difficult to calculate, therefore the HMRC simplify this cost to £6 per week. If you think you have greater costs from working from home, you can claim more, but will have to provide evidence of bills – this might be more hassle than it is worth. 

Overall, you can receive between £62 and 124 a year depending on your tax rate. Those on the basic rate will receive £62/year and those on a higher tax rate can get £124 a year, calculated on the tax relief per week. The weekly breakdown surmounts to £1.20/week if you’re a basic-rate (20%) taxpayer, £2.40/week if you’re a higher-rate (40%) taxpayer, or £2.70/week if you’re an additional-rate taxpayer (45%). What makes this scheme great is that it is quick and easy to claim a one off payment. 

You can claim this tax relief through the government’s working-from-home microservice that will add the tax relief via your tax code in one lump sum.

What can you do with that extra £500 a month?

So if you take the average saving of UK workers per month when working from home versus working in an office, you can see a saving of £500 each month! We recommend you invest your money in a passive income stream that can help support your future. 

While it is hard to speculate, if you invested £500 a month just 10 years ago you can build a wealth of around £60,000, acknowledging inflation costs at 1 – 3% a year. If you choose the right investment vehicle you could yield a 8% rate of return, meaning investing your £500 each month can get you a total of £91,500 after 10 years. If you invested in a more risky option, like individual stocks, you could yield an investment much greater than 8%, although with more risk means a less predictable outcome. A safer option would be investing in an ETF, which weathers market volatility better and doesn’t run the risk of losing all your money if one company fails to perform. If you invested £500 a month in the S&P 500 for 10 years, you’d have around £120,000 today – that’s a 225% total return. If you want to keep things local, another popular ETF is the FTSE 100 which has the top 100 most highly capitalised blue-chip companies in the UK, investing in a low risk investment as these companies are all well-established. ETFs have the advantage of having low operating costs and being tax efficient compared to actively managed mutual funds. 

Working from home is here to stay! One study found remote employees work on average 1.4 days extra per month compared to those working in the office boosting productivity and saving on office costs.

What will you do with your extra money? Put it towards electricity and heating or invest it? Make your money work harder with BullBear

Published by bullbear.io

Optimising trading success through competition and guidance.

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