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Working from home offers many small business owners obvious benefits. You save time and money by not having to travel to and from work, you have complete control of your working environment, and you can also claim home business expenses.
The question is, what exactly can you claim? And how?
It’s worth finding out because you can potentially save thousands of pounds!
If you work full-time or part-time from home there are a range of ‘fixed’ and ‘variable’ costs which you can claim back as a result.
These are the costs that need to be paid regardless of whether or not you’re working from home. They include:
As the name suggests, these are the costs which vary depending on your usage. They include:
Calculating how much you can claim back on those fixed costs can be pretty simple. And the same rule applies to your electricity and gas – or any other source of energy you may use.
Here’s how it’s done:
To begin with, calculate the proportion of your home that you use for business purposes for each of these costs. This is done either by room or in square feet. If your house is made up of five similar sized rooms (excluding the bathroom) then you work it out as one fifth or 20% of the house (assuming you have just the one room for homeworking).
Next you have to calculate the amount of time spent in the office. This is where it gets more complicated because there are a number of different ways in which your home office might be set up.
Some freelancers, contractors and small business owners have an office which is used exclusively for the purpose of work. If this is the case, then your calculations remain pretty simple.
For example: You’re using one fifth of your home as a home office. Which means you have 20% of your fixed costs available to claim as expenses.
If you’re home office is used for mixed purposes (for example, if you’re using a bedroom partly as an office) then you have to work out the proportion of the house you use and divide this by the amount of time you spend using it for business purposes to work out how much you can claim.
Be aware, you must ensure that the room clearly possesses a bespoke work facility. In other words, ensure that you have a work desk and chair, and a shelf populated with files and reference books (or whatever it is you need for your line of work).
Many home operated businesses use a full time home office which is also used for other purposes outside of work times. Others may have an open plan house which can’t be divided by the room.
If you’re home office set-up is somewhat more complex than our examples, then it’s well worth checking out this really useful page on the HMRC website.
Electricity and gas: Calculated via the above method.
Phoneline: It’s pretty obvious how much is claimable if you’ve got a dedicated business phoneline. However, if you’ve got a phoneline used for business and general use then you need to claim the relevant proportion of the bill. Get it itemised!
Repairs and maintenance: You can claim back for any repairs or maintenance work but only if it specifically relates to your work. If you’ve had your work laptop repaired then that’s clearly a legitimate expense or indeed if you’ve had your bespoke office decorated.
The key question to ask yourself at every stage is: do I genuinely use it for business purposes? And can I prove it?
As ever with such issues, if you’ve got any doubts ask a qualified accountant. All Crunch customers get unlimited access to a team of expert accountants who are always on hand to provide the answers.
We’re fast approaching the end of the tax year on 5th April, and now is usually a good time to get to grips with any tax changes, so you can maximise your tax efficiency for the outgoing tax year and get your business prepared for the new tax year. You’ll also want to stay up-to-date with the rates and thresholds.
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