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.
Home office expenses: What you need to know
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.
Simplified expenses
These are a flat rate of expenses set by HMRC and based on the number of hours you work from home:
- £10 per month if you work 25 to 50 hours
- £18 per month if you work 51 to 100 hours
- £26 per month if you work 100 hours or more
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.
Actual costs
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.
What home office expenses can you claim?
If you’re self-employed and work from home you’re entitled to claim a reasonable proportion of your household expenses. These can include:
- Heating and lighting
- Mortgage interest (not capital) or rent
- Council Tax
- Internet and telephone use
- Water rates
- Some repairs and maintenance work
- Buildings insurance
How to maximise your home office expenses claim
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:
- Take the number of rooms used for business as a proportion of the total rooms in the house. This excludes hallways, kitchens and bathrooms. For example, if your house has a living room, two bedrooms and your office, you could claim a quarter of your household costs.
- Use the amount of time you spend working from home to divide your costs.
- Isolate particularly high costs. If most of your telephone and internet costs are for business use, you may split the rest of your costs using one of the methods above and calculate business and personal telephone and internet costs separately.
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.
