If you are one of the 5 million+ people who are self-employed, and you work from home, there are a whole host of things you can offset against your tax bill. Talk to us about your individual situation and we can make sure that you aren’t underclaiming.
How much time do you spend working at home?
As a self-employed person, you should take a view on how much of your working week you spend at your home premises/office.
For example, a self-employed gardener might spend 20% of the week on quotes, drawing up plans, ordering supplies and other admin with the other 80% spent in customers’ gardens. A self-employed marketing consultant might spend 90% of the time in the office with the remaining 10% in client meetings.
These proportionate figures have an impact on the amount you can reasonably claim so it’s worth working out and bearing in mind.
If you work from home
You may be able to claim a proportion of your costs for things like:
· Council Tax
· mortgage interest or rent
· internet and telephone use
You’ll need to find a reasonable method of dividing your costs, for example by the number of rooms you use for business or the amount of time you spend working from home.
Example: You have 4 rooms in your home, one of which you use only as an office.
Your electricity bill for the year is £400. Assuming all the rooms in your home use equal amounts of electricity, you can claim £100 per year as allowable expenses (£400 divided by 4).
Further, if you worked only one day a week from home, you could claim £14.29 as allowable expenses (£100 divided by 7).
You can avoid using complex calculations to work out your business expenses by using simplified expenses. These are flat rates that can be used for:
· working from home
· living on your business premises
However you choose to proceed, HMRC states that it must show a ‘fair and reasonable’ balance between your private and business uses, as mentioned above. The flat rate method is simplest but may be on the low side so we normally recommend the above based on rooms and usage.
You can't charge your business rent when you're self-employed, because legally you are the business. But if you're renting your home from a landlord, then you can claim a proportion of the rent for your business.
You may be able to claim a proportion of any interest on your mortgage but not the capital repayment.
Light and heat (as above)
You can claim the business proportion of your gas and electricity costs for lighting and heating in the room(s) you use for business.
If you use something for both business and personal reasons
You can only claim allowable expenses for the business costs.
Example: Your mobile phone bills for the year total £200. Of this, you spend £130 on personal calls and £70 on business. You can claim for £70 of business expenses.
If a property repair relates solely to the part that's used for business you would include this cost in your accounts in full.
You can’t claim for use of water in your business unless you have a separate, dedicated account for business use only.
Food and drink
This can be a grey area which we can guide you on. Emily at FreeAgent created a fun infographic (see pictured above) that helps explain claiming lunch while you’re out and about on business.
Essentially if you are dining with a client and you pay for both of you then it is classed as entertaining and that’s not allowable. If you buy your own lunch, then you can claim that back.
You may claim for business travel. The amount depends on how much of the travel relates to the work element. If you travel to a meeting but visit a relative on the way back, strictly speaking, you may only claim for part of the journey.
Regular, predictable journeys for work purposes are not allowed. HMRC has its own mileage rates for car travel for you to base your expense claim on. You can claim the full cost of any business related journey, even if there was a cheaper alternative available – for example, if you choose to fly instead of driving.
HMRC is very strict about this. In a nutshell you can claim for a uniform, protective gear, a costume (say you are children’s entertainer for example) but you categorically cannot claim for any item of clothing that might have a dual purpose. Your work jeans, as an example, might be reserved for your plastering business but, as you can wear them elsewhere, you can’t claim, even if they are only used for work.
You can claim for cleaning costs if you pay a cleaner and have a receipt for their work.
Talk to us
There are a number of other business expenses you can claim for including stationery, equipment and things like trade/professional magazine subscriptions. We can look at your outgoings and advise accordingly so you are legally and compliantly operating at your most efficient financial position. It’s what we do best!