Many businesses start in a spare bedroom or on the dining room table. Even when they’re well established most business owners work from home at least part of the time, for example during the evening or on weekends.
Working from home means you can claim part of your household costs for tax purposes. But who can claim, how much and which costs? It is amazing how many people think that they are not entitled to the ‘use of home’ deduction. Many people think they can’t claim because they’re already claiming for an office, shop or other business premises. Not true! Although the amount of the claim is likely to be less, a ‘use of home’ claim is still possible as long as some work is carried out at home.
How much can you claim?
Claims should be based on the proportionate use of the property for business. The main factors to consider are time and space: how much spaceis set aside for business use and how much time is spent on business.
There are many possible methods for calculating the business proportion. In practice, the most popular method is to simply take the number of rooms used for business as a proportion of the total number of rooms in the house. Hallways, bathrooms and kitchens are excluded from the calculation.
What expenses can be claimed?
Most people don’t realise how many costs can be claimed if they work from home. A self-employed person working from home is entitled to claim a proportion of most household costs, including:
- Mortgage interest or rent
- Council tax
- Water rates
- Repairs and maintenance
- Buildings and contents insurance
- Gas, oil or other heating costs
Telephone and internet costs may also be claimed, where relevant, although this tends to form a separate claim as the business element of these costs is usually a far higher proportion than for other household costs.
A proportion of general repairs and maintenance costs relating to the whole property, such as roof repairs or gas maintenance costs may be claimed.
Capital allowances may also be claimed on any furniture and equipment used for business, with immediate 100% relief usually available thanks to the annual investment allowance, subject to a reduction for any private use.