Allowable expenses for Self Employed working from home

urth

Hi,

I'm doing my self-assessment, and I want to calculate the expenses for working at home. I'd be very grateful if anyone who has actually done this could let me know if I've got it right, or if I'm way off base.

The basis for my calculations is that I share a flat with my girlfriend, where my "office" area is in the bedroom, and I spend 8 hours a day, in there working. We each pay £600 into our joint account for all monthly expenses - rent, council tax, and all other bills related to the household except food.

Therefore, I calculate the cost of working from home as such:

600 * 12 months = £7200 cost for the year.
7200 / 365 = £19.73 cost per day
19.73 / 4 = £4.93 cost per room, per day
4.93 / 3 = £1.64 cost of single room for 8 hours (a working day)
1.64 * 5 = £8.20 cost of a working week
8.20 * 52 = £426.40 cost for working from home all year.

Is that a legitimate calculation? Or am I way off? Any advice or help would be appreciated. Last year I just filed without any expenses/allowances deducted, which I know was a bit stupid but I didn't really know what I was doing then and I'm determined to have a better stab this time!

dori2o

HMRC allows £3 per week for using a room in the home exclusively as an office.

if you wish to claim more than that you must show clear calculations as to how you came to that figure.

Items that can be used in the calculations are

Insurnces (buildings/contents)
Council Tax
Rent
Cleaning costs
Heat Light and Power
Business use/proportion of telephone bill
Business use/proportion of bill

Water cannot be included unless the nature of the business dictates that a heavy useage of water is needed.

See here for more information

http://www.hmrc.gov.uk/MANUALS/bimmanual/bim47820.htm

The way to do it is to add up all the bills except the telephone and broadband.

Then follow your previous working out.

Divide by the number of rooms excluding hallways/kitchen/bathroom.
If the room is only used for part of the day as an office, work out the proportion of the day it is used as an office, so 8hrs a day would be 33%.

Add in the business use/proportiion of the telephone and broadband bills.

This leaves you the amount to claim as an expense.

You caould use the additional information part of the form to show this calculation.

urth

Thanks for that. However, as I understand it, the £3 a week figure is for employees of an organisation who choose to work from home, rather than self-employed people who work at home, and in any case, I don't use a single room solely as an office, so I don't think it applies to me.

It looks like I should leave water out of the calculations, although since our phone/broadband are both flat rate, I believe that by calculating the "8 hours" figure, I have effectively calculated the business cost.

dori2o

urth wrote: »

Thanks for that. However, as I understand it, the £3 a week figure is for employees of an organisation who choose to work from home, rather than self-employed people who work at home, and in any case, I don't use a single room solely as an office, so I don't think it applies to me.

It looks like I should leave water out of the calculations, although since our phone/broadband are both flat rate, I believe that by calculating the "8 hours" figure, I have effectively calculated the business cost.

Yes this is true, however, it is correct for those who are self employed to use the same calculation if they wish without being asked to justify it. It's simply easier for someone who can't be bothered to dig out all their bills etc. If however you want to do the full calculation there's nothing wrong with that.

urth

Thanks, that clears it up. Cheers!

ncthomas1

Has no one mentioned Capital Gains tax in this scenario? You are on shaky ground here! Not to mention NNDR if the local council find out and then suggest you pay the same calculation for non domestic rates in stead of normal council tax for the "Proportion" of the property you are deciding is specifically business related, and trying to claim for as such. Be careful. Go for the £3 wk like everyone else. You are just asking for HMRC to be on your back on this one
Im an accountant so kind of know how this stuff works! If you need any more info check out hmrc advice on Capital gains on propery when you sell. That should scare you off!
p.s. HMRC will NEVER wear that you do 52weeks x 5 days. Not even I do that, even in January, and I am a workaholic

PlutoinCapricorn

Someone always raises the Capital Gains and Business Rates/Council Tax issue in these cases. As others have said, it does not apply to people who just go online or do consultancy etc. without making any major changes to their place of residence. It only applies when there is change of use to an entire room or floor to business use only: for example, converting to a photographic studio, stockroom or clinic.

ncthomas1

Thankyou - I was aware of this, was just concerned as I read the question and thought he was considering using the SPECIFIC changes to an entire area.
You are right, I just mis-understood what was being asked
Duh
It is January......

Valueaddedaccountancy

Such a shady area really its untrue - With regard to the original poster than you would probably just about get away with that based on experience.

I always find its better to claim a percentage of relelvant bills to be honest.

Loads of different ways to do it

urth

Thanks again - I did actually have someone mention capital gains tax to me and I've been trying to decide what the situation was there, so it's very helpful to see that's already been answered!

A friend in a similar situation said he estimates his costs as 10% of rent and a quarter of electricity, but that value comes out higher than I calculated above, so I think I'll stick closer to my original plan, while revising it for what I've since learnt.