As working from home has become more of a permanent fixture in most of our work lives I thought I would include a summary of the ways you can claim working from home expenses.
If you are self-employed there are two ways HMRC will allow you to claim use of home as an allowable business expense.
If you are a director needing to claim use of home expenses take a look at my blog Working From Home as a Director explaining how to do this.
1. Simplified Expenses
(This cannot be used by limited companies)
This method allows you to apply a flat rate to the number of hours you work from home each month. So it removes the need to calculate the personal and business use of your home. This method is quite straightforward and removes the need to keep any receipts.
This method does not include your telephone or internet expenses as these will be calculated separately using your actual costs and calculating your business use.
I have included the approved HMRC flat rates and expected business hours below:
Hours of business use per month Flat rate per month
25 to 50 £10
51 to 100 £18
101 and more £26
So how do you calculate your use of home amount?
As an example, if you work 30 hours per month, you could claim £10 per month.
But if you work 10 hours for one month it means you won’t be able to claim anything, as you have to work at home at least 25 hours per month to claim.
2. Actual Costs for claiming use of home
This method of calculating use of home is a lot more involved than the simplified expenses method and all receipts will need to be kept as well as proof of your calculations.
The most common way to do this is to add up your actual costs for the tax year and divide it by the number of rooms multiplied by the percentage of business use of the rooms.
The number of rooms used for business use would normally exclude kitchens, hallways and bathrooms.
The percentage of business use can be calculated by working out the numbers of hours worked by the number of hours in the year.
If you use a room in your house for business purposes only you are likely to trigger capital gains tax when you sell your home, so it is always worth ensuring your office has a dual purpose, for example, an office and a hobby room in one.
So what costs can you include in your calculation?
- Rent (you can’t charge your business rent as you are legally the business but you can include the rent you pay to a landlord)
- Heating & Electricity
- Repairs (solely related to the business area of your home)
- Cleaning (solely related to the business area of your home)
- Council Tax
- Internet and telephone use.
The calculations steps are as follows:
- Add up your actual costs for the tax year
- Divide your actual costs by the number of rooms in your house
- Divide your hours worked by the hours in the year to determine your percentage of business use
- Then multiply your actual costs per room by your percentage of business use.
P.S. depending on how much you use your home for business you may have to pay business rates.
As always just a reminder that I am an accountant but I am not your accountant, this blog is for information purposes and should not be taken as advice.