Expenses you can claim when working at home
If you work from home you can claim a proportion of your electric, gas, water, council tax, insurance and mortgage interest or rent. If you are lucky enough to have a cleaner you can also claim the business proportion of their costs. The amount to claim is based on the amount of rooms in your house used for business purposes and the amount of time working from home.
The amount can be worked out in two ways:
- Simplified expenses
- Fair proportion of actual bills
The simplified method of working out your use of home uses a flat rate depending on the number of hours you work from home each business month as follows.
Hours of business use per month
|Flat Rate per month|
|51 – 100||£18|
Have a look at each month and see which category you fall into. If you have a seasonable business and work more hours some months than others, then you can claim a higher rate for the months you work more hours.
For example, say you usually work 30 hours per month for 10 months of the year, but the two months leading up to Christmas you work 60 hours per month:
10 months x £10 £100
2 months x £18 £36
Total expense for the year £136.
Fair proportion of actual bills
The other method takes a bit longer to work out, but generally gives you a higher expense amount, so will reduce your tax bill more than the simplified method!
You will need a reasonable method for calculating the expense you can claim – ie divide your bill by the number of rooms you use for business or the amount of time you spend working from home.
For example, if you have 5 rooms in your home, one of which you use as an office.
Your gas and electricity bill for the year is £500. Assuming all the rooms in your home use equal amounts of gas & electricity, divide the bill by the number of rooms in your home (£500 divide by 5 = £100), then divide 7 (for days of the week – £100 divide by 7 = £14.29) and then times this amount per day by the number of days you use this room for business purposes (if you work 3 days – £14.29 x 3 = £42.87). Do this for all your household bills, then add them up to get the total Use of Home amount to include on your tax return.
If you are self employed you can include all of your household expenses:
- Gas & electric
- Council Tax
- Buildings & Contents Insurance
- Rent or Mortgage Interest (ensure you only include the interest element – the capital part of your payment cannot be included or your business will technically own part of your home!)
If you are operating as a limited company you can only include the variable bills:
- Gas & electric
- Cleaner – if you working from home causes additional cleaning
For bills like your home phone and broadband you can claim a fair percentage for business use – ie if you spend approx 60% of your time on the phone/broadband for personal use, and 40% for business use then you can claim 40% of the bill as an expense. Just remember that even if you physically do not use your home phone you still need the line to use the broadband!
If you have another employment – ie your business is on the side of a day job, you can also include these as an expense for your employment on your tax return.
One thing to note – if possible, do not use any part of your home, or outbuildings (ie shed/garage) exclusively for business, or when you sell your home the gain attributable to that part of your home is chargeable for Capital Gains Tax, and the council will also want to charge you business rates as well as the normal council tax. So always use your office to do personal paperwork/kids homework/guest room/personal storage etc!
If you’d like to know more about the expenses you can or can’t claim with your business have a look at our Expenses You Can Claim blogs or get in touch.