If you are self-employed and use part of your home as an office, some of your expenses are tax-deductible. However, you need to be aware that:
1. You should keep evidence of the costs (bills etc.)
2. Every claim is different and involves an element of common sense and understanding of how the tax relief works
3. There may be tax penalties for incorrect claims
4. For the purpose of this article, we have used the number of rooms and hours. However, this is not the only way to calculate expenses
How to calculate the claim
1. How many hours is your home used for your business daily?
To answer this question, you need to consider where else you work, whether you employ anyone else who works at your home and the type of work you do. Total up the number of hours your home is used each day.
2. Rooms used for work
To calculate this, you need the total number of rooms in your house, how many are used exclusively for work, and whether they a used partly for private use. Also, do you store anything at home for work?
3. Work out your annual costs. E.g.
Mortgage Interest or rent £4,800
Council Tax £1,320
Water Rates (if metered) £720
Building Insurance (not contents) £500
Full Time Workers
If you work more than 7 hours per day, you need to take the total costs (£11,030) and divide by the number of rooms in the house. Let’s say there are seven rooms.
£11,030 / 7 = £1,575
Multiply by the number of rooms you use for your business. In this example, we are assuming there is one room used 90% and one room used 50% for business.
£1,575 x 1.4 = £2,205
Part Time Workers
If your daily use is less than 7 hours, you may need to restrict your claim if you are using the rooms privately as well. You can calculate this more accurately over 24 hours as follows:
Assuming the same rooms as above:
£2,205 multiplied by your total hours each day (assume you work 3 hours per day at home)
£2,205 x 3 = £6,615
Divide by 24 hours
£6,615/ 24 = £276
Fixed Rate Claims
From April 2013, you can claim a fixed rate rather than go into all the details above. This is based on the number of hours you work from home as follows:
25-50 hours/month = £10 per month
51 to 100 hours per month – £18 per month
101 hours+ per month = £26 per month
Minor use of home
HMRC will not challenge claims where there is a minor use of home. Therefore, if you use your home at all as an office, whether employed or self employed, you can claim £4 per week as an alternative to working out the above calculations.
Need more help?
Call Ainsley Gill on 01424 730000 or email firstname.lastname@example.org