What expenses can I claim when working from home?

If you’re working from home then it’s possible that you’re missing out on claiming some allowable household expenses.

If you’re self-employed, these expenses could be included on your tax return. And if you’re the director of a company, your accountant can put an adjustment through the company accounts and allocate this against your director’s loan account – meaning you can then draw this from the business, tax-free.

So, what expenses could you be claiming, and how do you go about calculating the amount that can potentially be claimed back?

Craig Bailey, Finance Business Partner in the FD Works team, runs you through how to claim those home working expenses.

Stage 1. How many rooms in your home?

Firstly, count the number of rooms in your house. Think of a room as a ‘normal living space’, so exclude hallways and landings etc.

This room total is the starting point for your calculation. Don’t include your bathroom, kitchen or hallways, and work out how many other qualifying rooms there are in the property.

For the purposes of this example, let’s assume you have two rooms in the residence you’re working from.

Stage 2. Which rooms do you work from?

Next, think about which rooms you use when working from home. And, most importantly, estimate how your time in these rooms is divided up between business usage and personal usage.

If you have a defined office or study, this will probably be your main workspace. So it could be that you spend 90% of your time in this home office on business work – and only 10% on household administration or working on a creative hobby.

Your other room may be a living room, where you have lunch or write emails when taking a coffee break. So the division in usage maybe 15% business use to 85% personal use.

Note down this business/personal percentage for each room.

Stage 3. Divide your bills by the number of rooms

Now it’s time to look at your household bills and apportion the cost of each bill across the number of qualifying rooms you’ve counted in your total. You can only include those costs that are incremental and have increased due to working from home, such as electricity, gas, repairs and maintenance, and in some cases, insurance.

So, if your electricity bill comes to £300 for the period, divide that by your room total. In our example, this would mean dividing your £300 divided by two.

Stage 4. Divide your rooms costs by percentage of work usage

The final step is to divide your room costs per utility bill by the percentage of business time spent in the room (stick with us, it’s simpler than that may sound).

So, if we take the electricity bill as our example.

Do this calculation for each of your household bill and then add up your totals. You’ll end up with a table something like this:

A few considerations to think about

As a company director, that’s a tidy £328 you can claim back against your director’s loan account. You never know, it might even cover what you’ve spent on chocolate hobnobs while working from home!

Sounds simple, doesn’t it? But there are a few more complex considerations to take into account when claiming for these homeworking household expenses.

• Directors of a limited company can’t claim against fixed costs (things like mortgage payments, home insurance or repairs etc).
• If you sell your house after making your expense claim, it’s possible you’ll be hit by capital gains tax on your 25% gain.
• If you also use your home office as a guest room, you would avoid the capital gains tax, but would also see a reduction in the household costs you could claim.
• All business phone calls can be claimed in full, so you should break down your phone bill accordingly. e.g. If 50% of your calls are business-related, divide your phone bill by two.
• If you’re only working from home one day a week, and don’t want the hassle of making these calculations, it’s possible to claim a flat rate of £6 per week (£312 p/a) against your household costs – keeping the whole process as simple and straightforward as possible.

Need a helping hand?

If you and your fellow directors need some assistance to work out your home working expenses, this is something we can factor into your financial management package here at FD Works.

We love working with aspirational business owners and innovative small businesses – and we know you’ve got better things to do with your time than calculating expenses. So if you’d be interested in our outsourced finance support services, give us a call.

Who are FD Works?

At FD Works we take a different approach to finance. Our team of accountants, business advisors and Xero specialists empower ambitious business owners across Bristol and Bath to take control of their finances and make bold decisions.