When it comes to year end, we ask you for the information for your use of home as an office. This is a business expense which we can include in your profit and loss and which will lower your profit thereby saving you tax.
If you work from home at all, even if it is just doing some admin or raising invoices then it is worth claiming use of home in your accounts. There are two different methods to calculate the use of home value, flat rate or bills method. What is the difference?
Flat Rate Method
Flat rate is just that. HMRC sets a rate which is currently £6 per a week. This means regardless of how much or little you work from home, you can claim a maximum of £312 in your year end accounts as use of home. Whilst this is something (and better than nothing!), it will almost always be less than you can claim if you put in a little bit of work to obtain the information to claim under the bills method.
Bills Method
Bills method involves claiming a proportion of your bills relative to the proportion of your home used as a home office or for working (even if you work at the dining table or perched at the breakfast bar). We will do all the calculations for you to include in your year end accounts but we do need to know some information.
The percentage to use is worked out by counting the number of rooms in the house (excluding bathrooms and kitchen) and then how many rooms are used for working. Then how many hours a week the room is used and how many hours a week it is used for business purposes. It is important to note that these should not be the same as the room should not be used exclusively for business use otherwise this can cause capital gains issues when you sell your house. So ensure the room is used even for one hour a week for something other than business.
We then need to know the value of your household bills so we can apply the percentage worked out to work out how much you can claim. This involves going through your bills for the year but is worth the effort for what you can claim. We can claim a percentage of the following household bills;
Clearly if you are working from home, your internet and landline will be used for a percentage of business as well and this can also be claimed.
As you can see, there is so much more you can claim under the bills method and this will almost always be higher than the amount you can claim using the flat rate so it is worth putting in the bit of time to gather the necessary information.
Here at PPF we are always ready to help answer your questions and explain ways to (legally) lower your tax bill! Want to find out more? Check out our YouTube channel for our Advice & Tax Tips or get in touch to explore working with us further!
