Completing your home office expenses claim can be a fraught experience.
Here’s what you need to know about claiming expenses for your home office.
If you don’t know what you can claim, getting tax relief for your home office can be a pain. If you’re afraid of the taxman, you may err on the side of caution. This means you end up claiming fewer expenses than you’re entitled to. But if you over claim, you could end up with an unexpected tax bill.
Here’s the basics of what you need to know about claiming home office expenses.
These are a flat rate of expenses set by HMRC and based on the number of hours you work from home:
If you operate as a limited company, or you’re a partnership involving a limited company, you’ll also need to use this approach.
Simplified expenses can make it easier to complete your self-assessment tax return. You may be losing out if the flat rate is less than your actual costs. You can use the HMRC simplified expenses checker to calculate which method is likely to be best for you.
Simplified expenses don’t cover telephone or internet costs. You’ll need to calculate these separately.
Alternatively, you can calculate your expenses by working out the actual cost. As your office is part of your home, you’ll need to separate the costs associated with running your business from the costs of living in your home.
If you’re self-employed and work from home you’re entitled to claim a reasonable proportion of your household expenses. These can include:
The HMRC states you need to find a “reasonable method” of dividing your personal and business expenses. The method you choose may affect how much you can claim.
Here are three examples:
In the case of the first method, make sure you don’t fall into the capital gains tax trap. If you classify part of your home as business space, you may have to pay capital gains tax on it should you sell it. To avoid this, try and make your office a dual-purpose space, for example by using it as a spare room or exercise room.
Try using different calculation methods to see how much you could save. It may also be worth speaking to an accountant who can offer specific advice on your situation.