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Working From Home

Working From Home

Tax Benefits

Over the last 12 months more and more of us have been working from home - for the self employed there are tax benefits that you are entitled to when you work from home, make sure you are not missing out.


What proportion of running costs can be assigned?

When you work from home you cannot accurately calculate your electricity usage between personal and businesses use so you have to calculate a reasonable percentage depending on how much of your home is used for business.  This is generally calculated on room usage but can also be calculated on floor area. 


How you decide to calculate the proportion is up to you, but you must be able to justify and demonstrate usage if you are ever investigated.

An example of how the proportions can be calculated are as follows:
  1. Calculate the number of rooms in your house: 5 in this example.
  2. Calculate how many of the rooms you use for work e.g. 2 – the dining room and an office.
  3. As a percentage of the day how long do you use these rooms for?: dining room 10%, office 70%
  4. Divide the bill by the number of rooms in your home e.g. £500 annual electricity bill, divided by 5 rooms = £100 per room
  5. Multiply the cost per room by the percentage of the day that room is used for business e.g. dining room: £100 x 10% = £10, office: £100 x 70% = £70
  6. Your claim for a proportion of electricity costs using this method is £10 + £70 = £80
  7. Repeat this step for each eligible household bill.

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Every sole trader will have a different way of operating, some will work entirely from home for example a home-based graphic designer or online tutor, whereas others may split their time between their home and visiting clients to carry out work.

Even if you have a dedicated office at home, sometimes you may use other parts of your home on occasion. Whatever your set up HMRC allows you to assign a portion of your total home running costs as expenses allowing you to reduce your tax liability whether you work from home 100% or only part of the time.

What running costs can I claim?

You claim a variety of costs as running costs against your tax bill, these include:

  • Electricity

  • Gas

  • Council tax

  • Home insurance

  • Mortgage interest (not repayments)

  • Rent (if you rent your home from)

  • General household repairs

  • Landline rental

  • Broadband costs

  • Cleaning

Flat Rate.

Sometimes calculating the proportion of business usage can be time consuming and difficult if you use various rooms in your home.  To simplify things Sole Traders are permitted to claim a flat rate for light, heat and power per month as below:

  • 25-50 hours: £10 per month

  • 51-100 hours: £18 per month

  • 101 hours or more: £26 per month

(*As of 2020)

This method allows you to claim a flat rate for light, heat and power - you would still have to calculate other costs separately.

Capital Gains Tax.

When you sell a home you are usually exempt from paying Capital Gains Tax, however if you use a room in your home exclusively for business activities you may be required to pay Capital Gains Tax.  It is important to ensure you can demonstrate a room has dual usage to avoid being liable for Capital Gains Tax.

Sole trader home office expense claims are different from company directors.

Get in touch with Styles & Associates today for professional guidance on what you can claim as a Sole Trader working from home.

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Our address:

Berkeley House, Amery Street, Alton, Hampshire, GU34 1HN.

Call us:

01420 541 554

Mon-Fri 9am-5pm

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Working From Home

Moving our business to Styles & Associates made savings for us on our accounting fees, corporation tax, and personal tax.

Gareth Wilding

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