Working From Home – What Expenses can I claim?

By Stuart 5 years ago2 Comments

Many small business owners work from home.  One of the most frequently asked questions is “exactly what can I claim for?”

If you only work from home occasionally, perhaps raising invoices or writing up quotes in the evening, then HMRC have a flat rate allowance of £4 a week (21012/2013).  Using this method means you don’t have supply any back up for your claim, which means it’s nice and simple!

However, if you spend a significant part of your working week working from home, then it’s likely you’ll be able to claim more by using the apportionment method.  It works like this…..

First of all, you need to add up all the costs you can claim for.  These generally are:

  •  Gas
  • Electricity
  • Mortgage Interest (but not capital)
  • Rent (if you don’t own the property)
  • Council Tax
  • Home Insurance

You then need to divide this by the number of rooms in your house, excluding bathrooms and the kitchen.

Finally, you need to multiply by the amount of time you use the room for business versus personal use.

 As an example….

 If your total bills come to £9,000, you have 8 rooms in your house and use the office 50% for business use, then you’d calculate your costs as follows:

£9,000 divided by 8 multiplied by 50% = £562.50.  This would be your claim.

To make this easy for you, we have created a calculator that you can use to work this out.  You can download your copy by clicking  here.

 

The method you use for claiming your costs varies, dependent upon the type of business you run.

Sole Traders

Sole traders can simply claim these costs in their accounts, against their income tax bill

Limited Companies

Directors of Limited Companies should set up a rental agreement with their company, where the company rents space off the director for the amount calculated above.  The charge will appear in the company’s accounts as a cost.  The rental should also appear on the directors self assessment tax return as income in the rental section.  However, it will be offset by the additional costs of running the home, so the personal profit made will be nil and no personal tax will be due.

 Some final warnings……

If you are using the apportionment basis, you need to make sure that:

  •  You keep copies of all relevant bills claimed for.  HMRC will ask to see these in the event of an investigation
  • You should not make a room in your house solely available for business.  Rooms should always have a dual purpose (e.g. somewhere to do the ironing, use a spare room for guests).  This ensures that you cannot be challenged that the room should be assessable for business rates etc.
Categories:
  General BusinessTaxTax Tips
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