A Guide to Work from Home Expenses

Photo by Andrew Neel on Unsplash

If you run your business from home, you need to know about work from home expenses. Whether you work from the kitchen table, the spare room, or a studio in the garden, you can claim tax relief.

It sounds almost too good to be true, doesn’t it? But the fact is you can claim utilities like heating, electricity, internet and phone line, rent or mortgage, council tax and even repairs as expenses.

You can only claim expenses for the room/s you work in (not the whole house) and for the percentage of utilities you use (not the total bill). You can either work out an exact percentage, or you can use HMRC’s flat rate calculation. Working out an exact percentage is more time-consuming, but you may be able to claim more. HMRC’s flat rate calculation is nice and simple, but it’s a set amount so you may miss out.

Calculating your own work from home expenses

There are a number of steps involved in calculating your own work from home expenses.

1: Count up all the rooms in your home. These must be “normal living spaces” so don’t include bathrooms and hallways.

2: Identify the rooms you work in, and for how long. Calculate how many hours in total you spend in a room (e.g. 10 hours). Then work out how many hours are spent working in that room (e.g. 5 hours). In this instance your business usage of one room would be 50%. Repeat this process for every room you work in.

 3: For each bill you wish to claim expenses for, evenly divide the cost of the bill by the number of rooms in your home. The exception to this is phone and internet bills, which are instead calculated by working out the percentage of business use.

4: Apply the percentage of work use (e.g. 50%) to the room cost. For example if your bills total £100 for your living room, the calculation would be £100 x 50% = £50. Again, this calculation should be applied to every room you work in.

5: Enter the total amount into your accounts as a work from home expense.

Using the HMRC flat rate alternative

A much simpler solution is the HMRC flat rate expense. The calculation is based on the number of hours you work from home per month. It saves you doing any complicated calculations, but as mentioned about, it is a fixed amount so you may not be claiming all you’re entitled to. To learn more about HMRC’s simplified work from home expenses, click here.

If you need help with calculating your own work home expenses or using the simplified alternative, get in touch with Papertrail Bookkeeping today!