If you rent an office or workshop for your business, the tax return is relatively straightforward because it’s entirely for the company. However, if renting isn’t an option, you may find yourself working from home. With this comes additional expenses, and it wouldn’t be fair not to be able to include them in your tax-deductible expenses. The calculation is more difficult to work out, but it does pay to do it.
The Simple Route
HMRC have a flat rate that you can claim for the use of your home, but it’s dependant on how many hours you work. It’s ideal for smaller businesses and is simple to claim, but the rate is relatively low. Don’t forget that you can claim for things like internet cost separately.
Having A Dedicated Work Room
If a room in your house is dedicated to working, then it is worth getting out a pen and paper and doing the math. If the room has a dual-purpose, then you can’t claim back 100% of the costs. Think about how much time you spend working in that room, and this will be what you claim back.
Working It Out
Firstly you want to work out how many rooms are in your house (bathrooms, toilets, landings, hallways not included). Add up your annual household expenses and divide this by the number of rooms; this will give you the cost per room.
Now think about the percentage of time that you use your business room for work. Let’s say you have a seven-bedroom house that you use for 7 hours of the day. 1/7 is how you calculate the room cost, and then 7/24 is how you calculate what you can claim back. The same applies to your electric/gas bill.
How Often Should I Do These Calculations?
There’s no real benefit to working this out every month, so stick to doing it annually, and remember to include any fluctuating costs.
If you have set up a new business and you work from home, you’re entitled to claim some things back, so why not? It can be very stressful, especially if you aren’t confident with numbers. Having the right accountant can ease this burden and help you claim back what you are entitled to. If you were renting a separate office, you wouldn’t pay for it out of your own pocket, so why do so if you work from home? Get in touch today and see how we can help you.