If you are self-employed and work from home you can claim home office expenses on your tax return.
Which home office expenses are tax deductible?
- Mortgage or rent
- Utilities – gas and electric
- Council tax
- Telephone and broadband
- Water
- Property repairs
How much can I claim?
There are two methods used to work out how much you can claim;
1. HM Revenue & Customs (HMRC) state than you need to apportion the running costs of your home in a “fair and reasonable” basis. This means that you need to divide the costs fairly between the private element of the cost and the business element.
HMRC suggest the following guidelines;
- Area – What proportion of the home is used for business use?
- Usage – This can be used when there are measurable supplies such as electricity and gas.
- Time – How long is used for business?
Therefore you would work out the number of rooms and then calculate how much time you spend in the room, e.g. you are self-employed and work from home in a study three days a week. You have 5 rooms in your home. Your electricity bill for the year is £500. To work out the proportion of electricity for the study you would divide £500 by the number of rooms = £100
If you work three days a week from home you could claim £100 / 7 x 3 = £42.86 on your tax return. This is the electricity use divided by 7 to give a daily rate multiplied by the days worked.
2. Simplified Expenses Method
Due to the complex nature of working out the allowable expenses for working from home HMRC offer a flat rate allowance. Whilst it may not save you as much tax it avoids having to negotiate the numerous rules and keep all of your household expenses.
The allowance is simply based on the hours worked per month.
- 25 – 50 hours per month = £10 allowance
- 51 – 100 hours per month = £18 allowance
- More than 101 hours per month = £26 allowance
e.g. if you work 75 hours per month for 10 months but work 30 hours a month for two months over the summer you would claim;
- 10 months x £18 = £180
- 2 months x £10 = £20
Total you can claim for the year = £200
If you would like more advice or help with claiming expenses please contact our office for a free no obligation consultation by clicking the ‘get in touch’ button below.