You may have heard that HMRC allow £3 per week to be claimed for use of home as office. What many people don’t realise is that this is intended for people who do a small amount of admin work from home and was set to make administration easier.
Self employed people have more scope in what they can claim. You can claim a proportion of the actual costs of things such as rent/mortgage interest, water, gas, council tax etc and this is based on floor space used in your home.
HMRC give the example below:
Chris is an author working from home. She uses her living room from 8am to 12am. During the evening, from 6pm until 10pm it is used by her family. The room used represents 10% of the area of the house.
The fixed costs including cleaning, insurance, Council Tax and mortgage interest, etc total £6600. A tenth of the fixed establishment costs is £660. For the purposes of fixed costs, one sixth (4/24) of the use by time is for business, so Chris claims £110.
She uses electricity for heating, lighting and to power her computer, which costs £1500 per annum. Chris considers an apportionment of these costs by time and area. A tenth of the costs are £150 and half of these costs by time (4/8) relate to business use, she claims £75.
She also uses the telephone to connect to the internet for research purposes. Her itemised telephone bill shows that a third of the calls made are business calls. She can claim the cost of those calls plus a third of the standing charge.
The situation is slightly different for Directors where you can potentially charge rent to the business.
Make sure you are claiming what you are entitled to, otherwise you will pay more tax than you need.