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If you’re self-employed and working from home, you could claim some use of home expenses for this.

This might include business support activities such as marketing and social media, quotes and invoicing or admin as well as your actual day to day self-employed work.

There are two main ways that you can include expenses for working from home: actual cost and simplified expenses.

Before we go any further, this information only applies to sole traders or partnerships. If you’re a company employee or company director, check out this post for more information as you have different guidance.

Actual cost working from home expenses

The first method is to use your actual home office costs and claim a portion for your business use.

These costs would typically include:

Generally water costs aren’t included unless you have a metered supply and the trade that you’re carrying out from home uses a lot of water.  Otherwise water costs wouldn’t be significant.

You can’t claim the full cost of these expenses, only the portion that relates to your business use. So you need to work out the business percentage and personal percentage.

How do I work out the business portion?

There’s not one specific way to work out business use. HMRC will accept any reasonable way of working out your business costs as long as it’s logical and can be justified in relation to your situation.

The most popular way is to combine the portion of the house and the amount of time spend working there.

For example:

If you have 4 rooms in the home and use one as an office, that would be ¼ or 25%. So if your annual bill was £400, you would divide it by 4, giving £100 in relation to the business. If you know floor area, you could use this rather than number of rooms.

If you work at home full time, that would be 5 days per week or 5/7th of the time. You would apply this to the £100. This means that the total you could claim from your annual £400 bill would be £71.43.

If you only work from home one day per week then that would be 1/7th of the time. Here you could only claim £14.29 from your annual £400 bill.

This method works well for costs that relate directly to the property, such as heat and light, mortgage interest, rent and council tax.

For other costs such as home broadband and telephone, you may need to use a different percentage. This could be based on checking your call statement or any other logical estimate of the business use that you could justify to HMRC.

Here are some different examples from HMRC.

If you’re using the actual cost method then you should keep records in relation to the expenses that you claim.

If this all seems like far too much work, then you can use simplified expenses as an alternative for your home office costs.

Simplified working from home expenses

HMRC have a simplified expense scheme for use of home that lets you use a monthly flat rate instead of working out a portion of actual costs.

You can use this if you work more than 25 hours at home each month. There is a flat monthly rate ranging from £10 per month to £26 per month, based on how many hours of business use at home per month.

Depending on the hours worked you can claim between £120 and £312 per year. This may work out better or at least similar to the actual cost method, particularly if your work-use area is small in relation to your home.

You don’t need to keep records for use of home expenses claimed under the simplified scheme, apart from tracking how many hours you are working from home.

The simplified scheme doesn’t include business use on your home broadband or phone. You can still claim this in addition to the flat rate. However, you’ll need to do this using the business portion of the actual cost. There’s no flat rate scheme for these costs.

Which to use?

If you’re organised and have all your expense records, then you could use the actual cost method. This would also work well if you use a large portion of your home for your business or spend a significant amount of time there.

If you want ease, don’t have all the costs handy or don’t use a large portion of your home for work, then the simplified costs method may work better for you.

And remember, this only applies to sole traders and partnerships. It doesn’t apply to employees or company directors.

Expenses Income Tax Tax Return

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