Expenses you can claim if you work from home and how to work them out
Working from home is now quite common but for self-employed business owners, it’s nothing new. While every business owner’s situation is different, there is a general guide as to what expenses you can claim if you are self-employed and run your business from home.
What expenses can I claim?
Many self-employed businesses operate from a home office setup. As part of your business expenses, you can claim a proportion of the fixed and variable expenses you incur while working from home and help save on paying tax later down the line.
HMRC allows 2 ways of calculating this:
- The flat rate method
- The actual cost method
The flat rate method
Simplified expenses using the flat rate method is where you can apply a single rate approved by HMRC, based on the number of hours worked from home.
The benefit to this method is that it saves you time calculating the proportion of your home expenses, which are business related such as utilities, and means you don’t have to dig out all your bills to work out what was spent where.
Remember the flat rate does not take into account telephone or internet charges. These are claimed separately as a proportion of the actual cost which you can learn more about here.
The flat rate method can be quicker to calculate however, it does not always consider the full cost of your home and how much you are paying to work there.
You can only use the flat rate method if you work for 25 hours or more a month from home.
| Business hours per month | Simplified expense/flat rate per month |
| 25 to 50 hours | £10 |
| 51 to 100 hours | £18 |
| 101 + hours | £26 |
The actual cost method
This method takes into account the full cost of running your home. All that HMRC stipulate is that a ‘fair and reasonable’ basis is used.
The standard way to work out the actual cost is to look at how many rooms you have in your house and how many are used for business purposes, excluding common areas such as the hall, stairway and landing, toilets, and bathrooms.
Costs can include:
- Council tax
- Utilities
- Home insurance
- Rent or mortgage interest
- Repairs/maintenance (which should be apportioned based on the number of rooms or square footage used for business purposes)
Calculations tend to become more complicated if the home used by the business owner is owned jointly, or household bills are paid by more than one person.
Again, all that HMRC asks is that a ‘fair and reasonable’ calculation is used and any such calculation must have supporting evidence such as bills and invoices for support.
Summary
As you can see, the actual cost method can be complex which is why many choose to use the flat rate method. However, it’s down to personal choice.
Neither of the two methods take telephone and internet charges into account however, you can claim these separately.
Important
Remember! If you use a part of your home exclusively for tax purposes, then this may result in a Capital Gains Tax (CGT) charge when you sell your home.
If you have any questions about which method is better for you, please get in touch now. The tax deadline might feel like such a long way away but being prepared is better than being rushed.
If you’d like a quick 20-minute call to discuss your expenses, I’d love to hear from you.
