Self-employed people who work from home can benefit from more than just avoiding the commute. Did you know you may be able to claim some of the costs of using your home for work? Welcome to the bitesize guide on what you could be claiming for. Ta da!
What counts as a working from home expense?
Despite the benefits of your own professional work space, the cost of renting or buying a separate site might not be a viable expense just yet. And yes, because we’re accountants, we’re always going to advise you against stretching the business too far beyond its means!
Working from home tends to be a more cost-effective option for lots of self-employed workers.
Here’s what you could claim for:
Lighting and electricals
Repairs to any rooms which you use as part of your business operations. You’ll need to work out the proportion which applies to your business if you make repairs to the entire property.
Heating and gas
Home insurance if it includes business elements. Full business insurance is a separate claim.
Broadband and telephone line
Water, but only if you use it for the business beyond general daily use. For instance, a home hairdresser who has to wash a lot of people’s hair every day, rather than you popping to the loo!
In addition to these, self-employed people can also claim for the below, but directors cannot:
Interest on mortgage payments (but not the capital repayments amount)
A portion of rent payments
Council tax bills (unless the premises are used enough for work to warrant business rates)
Watch our video about claiming expenses when you work from home.
Claiming using simplified expenses
There are two ways to claim for using your home for self-employed work. If you work more 25 hours or more from home each month, you could simplified expenses, which is based on flat rates set by HMRC.
The amount that self-employed sole traders or partnerships can claim through simplified expenses depends on the number of hours spent working from home each month.
25-50 hours a week allows a claim of £10 per month
51-100 hours allows a claim of £18 per month
Anything over 101 hours per week permits a claim of £26 per month
Using the flat rate method to claim simplified expenses means you wont need to calculate the proportion of the bill that you use for the business. But, the flat rate offered by HMRC might not be high enough to cover costs for everybody who works from home.
If that’s the case, then you might need to claim by calculating your actual costs. If you’re the director of a small company claiming for working from home, it’s also worth considering you won’t be able to claim back any part of expenses for rent, council tax, telephone or broadband.
If you decide not to use the simplified method, or if you’re not eligible to use it, then you can calculate your expenses on a proportional basis – known as the costs method.
Because not every self-employed person is office based, this method looks at how much of the property is used for work, and how much time it is used for.
For example, a self-employed plasterer spends most of their working time in other people’s houses, rather than working in their own. A graphic designer will spend more time at home.
How to calculate expenses using the costs method
Count the number of rooms in your property.
Leave out what HMRC calls ‘normal living spaces’ such as bathrooms, hallways, landings.
Assess what percentage of the time each room is used for work instead of your normal domestic usage. A home office might be used 90% for work, and 10% for personal use. A kitchen might never be used for work, and a dining area might be used on a 60/40 split.
Calculate your total household running costs for the year.
Divide your total household running costs by the number of rooms in the property, to give you a cost per room.
Multiply the cost per room by the percentage you use it for work.
The total business use figures will show you what you can claim as an expense for working from home.
Reassess this each time you complete a tax return.
An accountant’s top tip for claiming with the costs method
It’s useful if each room that you use for business also has a secondary personal use too. Not only does this increase the usable space of your home, but it will avoid potentially paying capital gains tax, if and when you come to sell the property.
For example, make your home office double up as a spare storage room too, by fitting a wardrobe with clothes in in there. That way, if HMRC should pay you a visit, you can prove the duel use.
Find out more about claiming for using your home for work by watching our help video. For more expert advice from our team of friendly professionals, get in touch by calling 020 3355 4047 or by sending an email straight to firstname.lastname@example.org
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