When you’re self-employed and work from home, you are entitled to claim back some of the running costs of your house.
Calculating business use of your home can quickly become confusing, especially if you spread your time across working from your home office and other locations.
However, it’s important to get it right and be prepared to prove to an HMRC inspector that the costs you’ve claimed are ‘fair and reasonable’.
We’ve outlined what you can claim, the different ways in which you can count up these costs, as well as rounding up some key things to consider when calculating use of home expenses.
What can you claim as an allowable expense when you work from home?
HMRC states that you can claim a proportion of the costs you incur when running your business from your home.
Depending on your circumstance, this includes mortgage and rent payments, council tax, utility bills, internet and phone charges and – in some instances – property repairs.
You can find the full list of allowable expenses here.
Meanwhile, FreeAgent explains each expense in more detail here.
How can you calculate working from home expenses?
Actual expenses.
The most common way of working out use of home expenses is by working out how many rooms you use for business activities.
Firstly, count the rooms in your home, not including kitchens and bathrooms. You should then identify which of these spaces you use for business and how long you realistically spend in these rooms.
For example, you may have four rooms – a living room, two bedrooms and a study but only ever work in your study.
So, you work in one out of four rooms (1/4).
You may spend 90% of your time in this room working and the other 10% doing other activities.
It’s advised that you have your office as a dual purpose space, especially if you own your home. If you only ever use your office for business activities, you may be liable to pay capital gains tax if and when you sell your property.
So be sure to use the room for something else too, such as an extra bedroom, a craft space or music room.
Now you have these figures, you should tot up how much you spend on running your home.
Multiply that by 1/4 and then multiply that figure by 90%.
So, you spend £10,000 per year running your home.
£10,000 x 1/4 = £2,500.
£2,500 x 90% = £2,250.
Simplified expenses.
Adding up your actual expenses can get complicated when you factor in any time you spend working away from your home.
If it all seems like a bit of a headache, simplified expenses might be a better option for you. This is a flat rate that can be used by any Sole Trader who works over 25 hours from home per month.
Below is an outline:
| Hours per month | Flat rate per month |
| 25-40 | £10 |
| 51-100 | £18 |
| 101+ | £26 |
You can also use simplified expenses for costs for vehicles and living in your business premises.
Things to keep in mind when dealing with working from home expenses.
As we’ve mentioned before, HMRC needs your claim to be ‘fair and reasonable’.
If you claim for expenses you genuinely spend on working from home and can prove it, you shouldn’t have anything to worry about.
A common misconception is that you can’t claim for use of home for business if you also claim for an office space or work at other premises. This isn’t true at all. For Sole Traders, you can choose to work at home or from an office you pay for.
Lastly, calculating working from home costs isn’t straightforward as everyone’s business is different. If you are uncertain of anything, you should consult with your accountant as to the best way forward.
If you have any questions about business expenses and what you can claim, please get in touch with us today.
