If you are self-employed and working from your home office, don’t miss out on claiming allowable expenses for working from home.
There are two ways you can calculate this:
1. You can claim a flat rate
2. Actual costs of your household bills proportion
How to Calculate the Flat Rate
The working from home flat-rate allowance for the 2021/2022 tax year are:
* £10 – if you work 25 -50 hours per month
* £18 – if you work 51 – 100 hours per month
* £26 – for 101 and more hours
If you worked different hours each month, you can use different rates. For example:
You worked for 55 hours for the first 6 month
6 x £18 = 108
You have worked only 35 hours for the rest of the year
6 x 10 = 60
You can claim a total of £108 + £60 = £168
This method is super simple and you don’t need to keep any receipts, but…
! Always check if it would be more beneficial for you to claim the actual costs!
! you can only use it if you work more than 25 hours per week
! Keep invoices for your phone and internet, because you need to put a claim for them
Calculate Actual Expenses
Calculating actual expenses working from home is not as simple as using the flat rate, but it may be more tax-efficient to do so because the flat rate isn’t the most generous.
What can you claim for:
* Gas & electricity
* Rent, or Mortgage interest
* Insurance
* Repairs (careful on those) & cleaning
* Council tax
How to calculate the proportion of your allowable expenses:
Step 1 Count the number of rooms in your house
Step 2 Add up all the bills and divide the figure by the number of rooms
Now you have calculated the expenses for the room you have worked in, say your office.
Step 3 Estimate the amount of time you spend working in percentage
Step 4 use figure from step 2 x figure from step 3
* Make sure you keep all your utility bills;
Another thing you should think about is the size of the room, is the room you are using a lot smaller than the rest of the rooms in the house? You should proportion the amount to the size.
Also, check your tenancy or mortgage to make sure you are allowed to use the home as an office
Whichever method you choose, you can deduct these expenses from taxable profit.
Remember to keep receipts and claim expenses for:
Stationary, printer ink & cartridges, postage, computer software, telephone & broadband.
When it comes to expenses for repairs, be careful, the expenses can be only whole and exclusively related, so if you are working from the dining room and decorating it, you won’t be able to claim the fancy new furniture 😊
It may be time-consuming to gather all the receipts for your expenses for working from home, but it’s worth the while, and it will reduce your taxable profit and avoid these 5 mistakes when scaling your business.
