Use of home for self employed
We meet a lot of people who prepare their own tax returns to save having to pay an accountant. However, sometimes this turns out to be a false economy as there are some expenses they could be claiming against their income to reduce their tax liability of which they are not aware. The most common of these is the cost of working from home as the “use of home” rules can be confusing. I’ve, therefore, set out below an explanation of what you are able to claim as a deduction for use of home.
If part of your home is set aside solely for business use for a period of time you can claim as a deduction the costs incurred on that part during the period. This means you need to apportion the costs based on the following factors:
- Area; what proportion in terms of area of the home is used for business purposes?
- Time; how long is it used for business purposes, as compared to any other use?
- Usage; how much is consumed? This is appropriate where there is a metered or measurable supply such as telephone, electricity, gas or water.
The following costs are allowed as a deduction:
- Insurance – allow a proportion unless the business use is covered by a separate policy.
- Council tax – allow a proportion based on time and area.
- Mortgage interest – allow a proportion of interest based on time and area. Repayment of capital is not allowable.
- Rent – allow a proportion based on time and area.
- Repairs and maintenance – costs of redecorating a room used for business are allowable apportioned on a time basis.
- Cleaning – apportion based on time and area.
- Heat, light and power – apportion based on time and area unless the facts of usage support a different basis.
- Telephone and broadband – the cost of calls and a proportion of the line rental is allowed.
- Metered water charges – apportion based on time.
However, an added complication to calculating the above is that how the time apportionment is calculated can vary depending on whether the expense is a variable or fixed cost.
If you would like any help working out what you can claim as a business deduction to reduce your tax bills please contact us on 01273 737 307 or e-mail us on info@bainbridgelewis.co.uk.
[...] If you are working from home keep records of your household expenses as your accountant will be able to make a claim for “Use of home allowance”. [...]
This is a great post – so many people would complete and file their self assessment without realising that they could claim for a great many aspects of their costs associated with working from home. With more people now working from home due to the economy, there are more people who need to know information such as this or they’ll be paying too much in tax.
[...] If you work from home either as an employee or for your own business you can claim for a proportion of the running costs of your home – see our earlier blog on use of home. [...]
Thanks so much for the great information. It really helps knowing exactly what you can claim for.
I love reading your extremely informative posts
[...] have written a previous blog on making a use of home claim if you are self-employed. However, as an employee or director of a company you can also make a claim for working at home. [...]