I’m a self-employed writer and working from home – can I claim any expenses against my income for the use of my home?
As self-employed individual who works from home is entitled to claim any costs that are wholly and exclusively incurred for business.
If you incur costs that have both a business and personal element you may claim a proportion of these costs.
How much can I claim?
- Use the HMRC monthly fixed rate allowance which is dependent upon the average monthly hours worked from home :
£10/month if you work 25-50 hours per month
£18/month if you work 51-100 hours per month
£26/month if you work over 100 hours per month
This method has the advantage of being easy to calculate and minimises book-keeping records.
You will need to keep some sort of log of hours worked.
The final result is a low figure so actual expenditure may provide higher tax relief
- Use the actual expenses method:
Claim a proportion of the costs of running your home e.g. light and heat, insurance, council tax, repairs, cleaning, mortgage interest.
There is no set method of apportionment so a reasonable method of apportioning each expense must be decided upon for example, by number of rooms, by square metre of floor area, by proportion of time in use.
Document your claim.
Review it annually
My house is jointly owned by my spouse and bills are shared; do I need to restrict my claim for expenses?
Strictly, if you are not paying a bill then should not claim as an expense. HMRC usually allow the expenditure when bills are in joint names or when spouses contribute different amounts to settle the household bills. Problems may arise if the bills are not in your name and the payment is not made from your account.
Where possible it makes sense for the person who is claiming for use of home to pay the actual bills to avoid any challenge and queries in the future.
Can I rent a room to my business?
If you are a sole trader then you aren’t able to do this as the business is not seen as a separate legal entity to yourself. Technically, if your home is jointly owned with your spouse/partner then they could charge you rent for the space that the business occupies. However, your spouse will then need to prepare rental accounts and apportion expenses to offset against the
income so may not be commercially justifiable.
Can I claim my mortgage as an expense?
You are not able to claim the capital repayment portion of your mortgage payment but you can claim for the cost of a proportion of the mortgage interest.
If I’m working from home will this cause me any problems with capital gains tax (CGT) if I sell my home for a profit?
When you sell your main home, any gain is normally covered by Private Residence Relief. There will only be a CGT liability if part of your home is used exclusively for business purposes. It is therefore advisable to make sure any home office has some dual purpose.
Will I have to pay business rates if I work from home?
Local authorities may seek to charge business rates if they can argue that use of part of the building is not residential. Planning rules may also become an issue. For this reason I would advise against making claims from the business for altering the fabric of your home for business use e.g. converting an attic/garage into an office.
Making modifications for commercial use, installing specialised equipment, employing staff and holding meetings at home is the type of evidence local councils would be looking to obtain to argue a case for business rates.