When you start your own business, something you may consider is operating your business from home. Eradicating the need to purchase or rent extra property, as well as commuting costs will mean that you can put more money into your business.
One aspect of working from home that may not have crossed your mind is the increased energy costs that you will incur. It’s likely you will be using considerably more energy to light and heat your home, to power your printer and PC, and to use other facilities more often than if you were at a place of work throughout the day.
What you might not know is that businesses on average pay a lot less per unit of energy than residential energy customers, meaning that if you were to choose a business tariff you could save money. Before you decide whether or not to go onto a business energy plan, there are a number of factors and possible charges you need to consider.
Energy Forecaster has come up with the following points for people working from home and considering switching to a business tariff.
1. The amount of energy you use:
One of the requirements of switching to a business energy tariff at home is that you must use a large proportion of your energy for business uses. The minimum amount of energy that you are required to use to qualify for a business tariff will differ between suppliers (although if you work from home fulltime it is likely you will meet the required amounts). When calculating how much energy you use for home and business purposes, it is important to take into consideration appliances such as your fridge which would be running regardless of whether or not you are at home all day.
2. Do you have evidence that you are working from home?
When running a business from home you will need to ensure that you are officially registered as a business, have proof that your business exists and have a business rates document before being able to transfer to a business tariff.
3. Be sure that you want to commit
You can use your existing meter when you transfer to a business tariff, but to return to a domestic tariff you will be required to install a new meter, which may cost you.
4. Business tariffs operate on a fixed price
This means that your rate will remain the same throughout your contract. This can help you budget accurately and protect you from price hikes, although in the unlikely event that the prices fall, the amount you pay will stay the same. You cannot transfer back to your original tariff for the duration of your contract unless you pay the remainder of the contract off, which can be expensive.
5. Protecting yourself
Consumer Focus and Ofgem do not offer the same protection to some business energy customers. Although if you run your business from home then it is possible you fit the definition of microbusiness, meaning you will receive some protection. Take a look at our guide to business energy regulation for more information.
6. Remember the extra charges
For domestic energy customers the VAT charged on energy is 5%, whereas business energy customers usually pay 20%. Business energy users are also required to pay the Climate Charge Levy or CCL, at a cost of 0.509 pence per kWh for electricity and 0.177 pence for gas. There are some situations where these costs will not apply, but these charges are likely to raise the price of business energy. Ensure you don’t just look at the face value of the unit rates.
7. Bill energy as an expense
Regardless of whether you are on a business or domestic tariff, it is possible to claim the gas and electricity you use during your working day as a business expense. You can either claim for energy according to the proportion you use for business purposes, or for the area of your house that your workspace occupies.
Today’s Micro Action
Take meter readings at the beginning and end of the working day when you’re working from home to get an idea of how much running your business is pushing up your energy bills by. If it’s adding a lot of extra kWhs, call an independent business energy broker, who will be able to talk you though the process of switching and help you work out if it could save you money