Allowable expenses for use of office at home (self employed)

jimmo

Can we just break this down into little, manageable, pieces?
First the easy bit. As you already seem to appreciate, phone and broadband costs are not housing costs from a HMRC point of view and need to be dealt with separately on the basis of business use compared to private use.
Going on from there, the basic principle for Income Tax purposes is that if you devote one room (in your 5 roomed house) exclusively for business use then you can claim one fifth, or 20%, of your housing expenditure as a business expense.
If you only use 1 room in your house for business purposes but you use that room for other purposes then you have to apportion the cost of that room between business use and private use.
As a separate matter, if you own your house and use 1 room exclusively for business purposes there is a real danger that you will become liable to Capital Gains Tax in respect of that room when and if you sell your house. It is then a matter of tax planning whether you maximise your Income Tax relief by using a room exclusively for business purposes or reduce your Income Tax relief in order to avoid a potential Capital Gains Tax liability in the future.
As you rent your house that is a red herring because there is no way that you can become liable to Capital Gains Tax.
So, in principle, you are perfectly entitled to claim one fifth of your housing costs as legitimate business expenditure.
However, as you have said, the amount you can legitimately claim may seem to be disproportionate in the taxman's risk assessment processes.
I'm afraid that is the name of the game.
Claim £3 per week and you will probably stay under the radar but claim your true entitlement and you will be in much more danger of an Enquiry.

HappyMJ

I'd claim the 20% as you initially suggested. As long as the room is only used for business purposes and any other use is incidental. i.e you don't ever use it as a bedroom. I claim 30% of the rent, elec, gas, water etc and 50% of phone and BB. My claim comes to £55 per week. £2,860 per year.

debsleypig

Thanks so much for all the replies, they have been most helpful.

pipscot

HappyMJ wrote: »

I'd claim the 20% as you initially suggested. As long as the room is only used for business purposes and any other use is incidental. i.e you don't ever use it as a bedroom. I claim 30% of the rent, elec, gas, water etc and 50% of phone and BB. My claim comes to £55 per week. £2,860 per year.

I didn't think you were allowed to claim water!

Am seriously going to have to up my estimates!!!

HappyMJ

pipscot wrote: »

I didn't think you were allowed to claim water!

Am seriously going to have to up my estimates!!!

Only works if you can demonstrate you actually use some water in the business. It only comes to about 50p per week.

kaya

i believe if you claim that you use part of your home as an office you are then liable to pay business rates on that area , that was a few years ago but worth looking into

taxsaver

To the best of my knowledge HMRC and Local Authorities do not (are not allowed under Data Protection?) talk to each other. So the Business Rates issue is unlikely to arise unless you are running a very 'obvious' business like car repairs and servicing.