If you rent an office or workshop for your business, the tax return process is relatively straightforward because those expenses are entirely for the company. However, if renting isn’t an option, you may find yourself working from home. With this comes additional expenses, which you should be able to include in your tax-deductible expenses. The calculation can be more complex, but it’s worth the effort to ensure you are maximising your claims.
The Simple Route
HMRC offers a flat rate you can claim for the use of your home, which is dependent on how many hours you work from home. This method is ideal for small businesses as it simplifies the claiming process, although the rate may be relatively low compared to the actual costs you incur. Remember that you can also claim for separate expenses such as your internet costs, phone bills, and any other overheads associated with working from home, which can significantly add to your total claim.
Having A Dedicated Work Room
If you have a specific room in your house that is dedicated to your work, it’s crucial to take the time to map out what expenses you can claim. If this room serves a dual purpose, you cannot claim back 100% of the associated costs. Evaluate how much of your time you are spending working in that room as this will determine the proportion you can legitimately claim back. For instance, if you have a home office that also doubles as a guest room, you will need to carefully track the time spent working versus the time it serves other purposes.
Working It Out
Begin by calculating the total number of rooms in your house (excluding bathrooms, toilets, landings, hallways, etc.). Once you have this number, add up your annual household expenses such as rent or mortgage, utilities, and insurance, and divide this by the number of rooms to get the cost per room. This figure will provide a baseline for your claims.
Next, consider the percentage of time you utilise your designated workroom for business purposes. For example, if you have a seven-bedroom house and you are working from that room for 7 hours a day, you would calculate your claims based on the ratio of 1/7 for the room’s cost and 7/24 for the time you work per day. The same calculation can be applied to your electricity and gas bills to determine the portion of those costs that can be claimed back.
How Often Should I Do These Calculations?
There is little benefit in recalculating these expenses on a monthly basis; it’s more practical to conduct this assessment annually. When you do, remember to account for any fluctuating costs throughout the year, such as seasonal changes in energy prices or changes in your home working arrangements. Keeping detailed records can simplify this process greatly.
If you have recently established a new business and are working from home, you are entitled to claim back various expenses, so why not take advantage of this opportunity? It can be incredibly stressful trying to navigate these calculations, especially if you lack confidence with numbers. Engaging the right accountant can alleviate this burden and ensure you are claiming everything you are entitled to. Just think, if you were renting a separate office space, you wouldn’t be paying for it out of your own pocket; the same principle applies when you are working from home. Take the first step today and see how we can assist you in maximising your claims while you focus on growing your business.
Additionally, consider the potential benefits of tracking your expenses digitally. There are many applications and software available that can help streamline the process of managing and calculating your work from home claims. By maintaining an organised record of your expenses, you can simplify your annual review and ensure you’re capturing all possible deductions. This proactive approach can save you time and money in the long run.
Furthermore, it’s worth noting that the landscape of tax relief for home working can change. Keeping abreast of the latest guidance from HMRC and consulting regularly with your accountant can provide you with insights that might affect your claims. For example, changes in government regulations or tax thresholds can open up new avenues for claiming back expenses that you may not have previously considered.
Finally, it’s helpful to connect with other business owners who work from home. They can often provide insight and share their experiences regarding what has worked for them in claiming back home working costs. Networking with peers can uncover tips and strategies that may not be immediately obvious but could enhance your overall approach to managing home office expenses.