Working-From-Home Expenses For Self-Employed

Are you self-employed and running your business from home? Or maybe you have an office but occasionally you work from home? In your pyjamas, wrapped up nicely, feeling so cosy 🙂

Whether you run all your operations from home or do only a few hours from time to time, make sure you know about this when doing your self-assessment tax return…

You can claim certain home expenses as your business costs.

Hurray!

Claiming your business expenses reduces your tax, so this is great news.

But remember, we’re talking here about allowable expenses and not about anything you can think of.

What is an allowable business expense if you’re self-employed?

An allowable business expense is an expense that you incur wholly and exclusively for business purposes. This expense can be included in your self-assessment tax return.

Ok, back to the working from home expenses for self-employed.

What expenses can you claim when working from home?

-internet
-telephone
-heating
-electricity
-rent
-Council Tax
-mortgage interest (not mortgage repayments)
-insurance
-repairs

You CAN’T claim the full amounts. Would be great if you could though, right?

You can only claim a proportion that relates to your business.

How to claim for your working-From-Home expenses?

You can use two methods: either calculating your actual business cost or using simplified expenses.

Actual cost method

To calculate your actual business cost you need to first establish which factors you’re going to use in your calculations. In most cases you will use the number of rooms and the time you spend in those rooms while working.

This can be a great method when you’re calculating, for example, your electricity costs.

Example

-There are 5 rooms in your house.
-You use only one for business purposes and you use it for 70% of the time.
-Your annual electricity bill is £500.

Step 1  £500 divided by 5 rooms gives £100 per room per year.

Step 2  £100 multiplied by 70% gives you £70 you can claim as a business expense.

What about telephone costs?

If you are able to get a detailed report of your calls, then you only calculate the cost for these calls. Anything else isn’t allowable.

If you don’t have the details of your phone usage, you can apply a percentage. Be reasonable and fair here. If you make only two phone calls a month and you claim 70% of your bill, that’s definitely too much.

Simplified expenses method

You’re not super keen on spending your time calculating the actual costs? You can use flat rates set by HMRC instead.

But…

Simplified expenses can be applied to the following costs only:

➡Working from home
➡Vehicle costs
➡Living in your business premises

We wrote about simplified expenses for self-employed in a separate article. Please refer to it for more details.