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Working from home - allowances for the self-employed

If you work from home, understanding and calculating the expenses you claim can be a murky area. Guidelines and examples are given by HMRC, but these examples do not cover every scenario.
14/12/2017
News
News

Below we cover two ways you can calculate your expenses and we also include a few expenses that you may not be aware of.

The ‘simplified method’ of calculating your expenses

The ‘simplified method’ is the easiest and quickest way to calculate your expenses and this method allows you to claim a flat rate for using your home as a workspace.

The table below shows how much you can apply on your self-assessment return for the expenses of working from home using the ‘simplified method’:

Hours of business use per month

Flat rate per month

25 to 50

£10

51 to 100

£18

101 and more

£26

However, using this method could mean that you miss out on taking advantage of all your tax relief.

For full details on the simplified method see HMRC’s website  https://www.gov.uk/simpler-income-tax-simplified-expenses

DIY calculation

The second way is calculating the percentage of how often you work at home, by how many rooms you may use and applying this percentage across applicable bills. To do this you need to understand the average % of usage of your home. This calculation does sound difficult, but once you have calculated your first expense, you will be able to use the same percentages across all other expenses you claim.

 

Example

How many rooms do you have in your house? Do not count halls, pantries or small WCs.

7

How many rooms do you work in and for how long - as a percentage for the day?

2 rooms, lounge 25%

kitchen 50%

Divide each expense by the total number of rooms –

Gas £490 divided by 7 = £70

Then divide the room cost by the percentage of use for each room used for working from home

£70 x 25% = £17.50

£70 x 50% = £35

So, the yearly gas expense in the example is £52.50.

Now you need to calculate this percentage across each of your expenses.

Expenses you can claim for working from home

There are quite a number of expenses you can claim for working from home. And these include:

  • Mortgage interest or rent on your home
  • Utility bills including gas, electricity (not water, unless you can show you use water for business purposes)
  • Household insurance
  • Phone line rental
  • Council tax
  • Broadband costs
  • Cleaning costs – this can only be claimed if you pay a cleaner and you have a receipt to cover this expense

Here are a few other expenses you may not have thought about

Stationery – don’t forget to claim back your business related stationery expenses and these include paper, pens, business cards, envelopes, pencils and staples.

Printer toner and ink - you can claim back a proportion of the cost of toner or ink used for business documents you print. You will need to understand the percentage of business usage and apply this across the cost of the consumable – make sure you keep your receipts.

Property repairs – if you need to make a repair to your property, then you can claim this back as an expense using the DIY expense calculation above if the repair effects the area of the house you use for working from home. If the repair only effects the area you work in and let’s say you work in this area 60% of the time, then you can claim 60% of the overall repair bill.

You will not be able to claim any of the costs if the repair does not include an area of your property that you work in.

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