Self employed work from home- what expenses to deduct from tax?

cashmonger

After many years of low income being below the threshold and it not being on the horizon for paying tax the business in the past year has started to pick up such that I will soon be eligible to pay income tax.

So now I am looking to find out what things are eligible to write off against tax.

My business is Internet Marketing so there are very few business expenses in terms of work related 'goods'. Those which there are I already write in my accounts; most of which are digital goods. I have put an expense for my internet connection and do so for any electronic work related items I buy.

I have read around that you can put an expense for using home premises as a business so should I do that and if so how much?

Anything else I should add?

TheCyclingProgrammer

Firstly, unless the internet connection is exclusively for business use you should only claim a proportion of this cost. Same for phone line rental (although you can claim in full for the itemised cost of any business calls).

For general use of home you can use the simplified method (a flat rate):
https://www.gov.uk/simpler-income-tax-simplified-expenses/working-from-home

Alternatively you may calculate a proportion of your home bills using a reasonable method, e.g.:
https://www.freeagent.com/guides/expenses/working-from-home-expenses-sole-traders/

You can claim a share of your internet/phone line on top of this.

Any equipment you need to buy for your business is an allowable cost, so long as its wholly and exclusively for business purposes. This doesn't completely exclude some personal use as long as its deemed as insignificant, this test is usually met if you can't do your job without the equipment (so a new laptop if you require a computer will be allowable even if has some non-business use).

cashmonger

TheCyclingProgrammer wrote: »

Firstly, unless the internet connection is exclusively for business use you should only claim a proportion of this cost. Same for phone line rental (although you can claim in full for the itemised cost of any business calls).

Well if work is the lions-share of what I do at home then like you mention below then it counts doesnt it?

I would say I work around 8-10 hours average per day 7 days a week and the 1-2 hours would be spent doing non work so that would correlate with what you said after that

This doesn't completely exclude some personal use as long as its deemed as insignificant

TheCyclingProgrammer

cashmonger wrote: »

Well if work is the lions-share of what I do at home then like you mention below then it counts doesnt it?

But presumably you also have a need for a home internet connection for non-business purposes? If so, HMRC may argue that its not wholly and exclusively for business purposes, even if the majority of your usage is for business. It would be better to calculate a reasonable proportion and claim that. So long as you can show HMRC how you've calculated your usage and why you shouldn't have a problem.

cashmonger

TheCyclingProgrammer wrote: »

But presumably you also have a need for a home internet connection for non-business purposes? If so, HMRC may argue that its not wholly and exclusively for business purposes, even if the majority of your usage is for business. It would be better to calculate a reasonable proportion and claim that. So long as you can show HMRC how you've calculated your usage and why you shouldn't have a problem.

Ye I see the proportion calculator on their site. I'll do that. Or, if I choose to do the flat fee one then I wouldn't factor in internet at all then would I? It would be one or the other, either itemize everything or go the flat fee route.

TheCyclingProgrammer

cashmonger wrote: »

Ye I see the proportion calculator on their site. I'll do that. Or, if I choose to do the flat fee one then I wouldn't factor in internet at all then would I? It would be one or the other, either itemize everything or go the flat fee route.

The flat rate route doesn't include internet access - you can claim a proportion of this in addition to the flat rate.