Home working allowable expenses

Saturday, January 25th, 2020

As accountants we’re always going to advise you to not stretch your business beyond its means. And that can mean running your business from home.

Working from home can benefit you more than just saving time on the drudgery of commuting every day.  Here is our quick guide to the expenses you can claim.

Firstly, you should make the working space comfortable and practical at the same time.  Working from the dining table with the washing machine running in the background and the kettle calling every two minutes isn’t going to lead to a productive day.

Working from your home is a cost-effective option for many self-employed people.  You can claim for:

  • Lighting and electricity
  • Repairs to any rooms which are used as part of your business operations, or proportionally if it’s a repair to the entire property.  This does not mean that you can apportion the cost of fitting a new kitchen!
  • Heating
  • Home insurance if business elements are included, you will have to ask your broker what the business element costs
  • Broadband and telephone
  • Water – but only if it’s essential for your trade, e.g. a home hairdresser who washes people’s hair.  Popping to the loo and making a cuppa is not considered essential.

Self-employed people but not directors of limited companies can claim for the following:

  • Interest on mortgage payments but not the capital payment
  • Rent payments if you rent your home
  • Council tax as long as your trade doesn’t warrant business rates

How to claim using simplified expenses

There are two ways to claim, if you work more than 25 hours each month, you can use the simplified expenses method which is based on flat rates set by HMRC.

It all depends on the number of hours spent working from home each month:

  • 25-50 hours a week allows a claim of £10 per month
  • 51-100 hours allows a claim of £18 per month
  • Anything over 101 hours per week allows a claim of £26 per month

Using this method removes the need to calculate usage proportions and actual business costs for each individual element.  The flat rate however may not be high enough to cover the costs for everybody who works from home.

Don’t forget however if you’re a director you can’t claim part of expenses for rent, council tax, telephone or broadband because those expenses would have been paid personally anyway.

Use the HMRC simplified expenses checker – https://www.gov.uk/simplified-expenses-checker

Claiming proportions of your costs

If you decide not to use or are not eligible to use the simplified method, then you will need to calculate the proportion of time you use your home for.  Not every self-employed person is office based, e.g. a plumber spends most of their working week in other people’s homes, rather than working from their own.  A child-minder will spend more time at their own home.

To calculate the cost:

  1. Count the number of rooms in your home
  2. Exclude ‘normal’ living spaces such as hallways, bathrooms and landings.
  3. Assess the percentage of the time each room is used for work instead of family time.  E.g. a home office might be used 90% for work, and 10% family use.  The kitchen might not be used at all (making that cuppa does not count), and a dining room might be used on a 60/40 split.
  4. Calculate your total household running costs for the year.
  5. Divide the running costs by the number of rooms in your home, this will give you a cost per room.
  6. Multiply the cost per room by the percentage it is used for work for each room you use, it’s unlikely you will use every room.
  7. The total business use figures will show what you can claim as an expense for working from home.
  8. Reassess this every year.

Seamount Accountancy’s Top Tip

To avoid paying capital gains tax when you sell your home make sure the rooms you use for your business have a dual purpose, some business use and some family use. E.g. if you use the spare room as an office, have a bed in there too for occasional use.

If you’d like help with any of your financial admin contact us HERE, we’re always available for a coffee and a chat.


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