Self assessment - claim on home office expenses

suestew

Hi, just sorting out self assessment tax return for other half as I am now employed to do his accounts.  One thing I am stuck on is if we can claim anything on the rent we pay for our home.  I was informed that a proportion of home rental & premises costs (what can I claim if any?.) can be claimed for as he uses one room as an office. To be clear he doesn't work from home, he works in the building trade and the office is purely for day to day stuff such as estimates, clients calls, accounting etc., .  I cannot find anywhere  details on how to work this out or even if it's allowed. And I have searched the gov website. 

Anyone throw any light on this? I appreciate you might need more details but appreciate any help. thanks. 

Grumpy_chap

Simplest would be to claim the £6 flat rate against tax for WFH:
https://blog.moneysavingexpert.com/2020/04/martin-lewis--working-from-home-due-to-coronavirus--claim-p6-wk-/

suestew

Grumpy_chap said:

Simplest would be to claim the £6 flat rate against tax for WFH:
https://blog.moneysavingexpert.com/2020/04/martin-lewis--working-from-home-due-to-coronavirus--claim-p6-wk-/

thanks. To confirm, it's for home office, nothing to do with working from home due to corona virus. 

Jeremy535897

If your partner is a subcontractor in the construction industry, and is self employed, the link above does not apply, because it is for employment income. This article discusses your question in some detail:

https://www.freeagent.com/guides/expenses/business-use-of-home/

You mentioned your partner "employing "you. Is he going to pay you?

suestew

Jeremy535897 said:

If your partner is a subcontractor in the construction industry, and is self employed, the link above does not apply, because it is for employment income. This article discusses your question in some detail:

https://www.freeagent.com/guides/expenses/business-use-of-home/

You mentioned your partner "employing "you. Is he going to pay you?

Thanks. It's my partners business, so not a subcontractor & yes he will pay me. 

Jeremy535897

In that case he may need to operate payroll for you. Whilst I believe he can escape doing that if you are his sole employee and are paid under £120 a week and have no other income, there may be benefits in paying you a bit more so you can get more years on your NI record. He also has to obey the minimum wage rules, and be ready to justify your wage if he seeks to claim a deduction for it from profits.

suestew

Jeremy535897 said:

If your partner is a subcontractor in the construction industry, and is self employed, the link above does not apply, because it is for employment income. This article discusses your question in some detail:

https://www.freeagent.com/guides/expenses/business-use-of-home/

You mentioned your partner "employing "you. Is he going to pay you?

also, thanks for link. What I am really unsure about is how I break down my rental or any other costs on what I can put in the tax return. I assume it's a percentage of sorts, but based on how many rooms in house, then work out the cost of the office room? I thought I had read something somewhere on how to work this out but can't find it now. I would have thought the government would have something to help?

Jeremy535897

I don't think I can add much to this from the link:

The costs method

If your business is a limited company, you’re not eligible to use the simplified accounting method and you’ll have to use the costs method. The amount you can claim using the costs method depends on the type of business you have and what work you actually do at home.

For example, if you're a freelance decorator you might spend an hour or two a week writing up your books at home, but spend the rest of your working life at your customers' properties. But if you're a self-employed PR consultant or web designer, you may well do the vast majority of your work at home and only occasionally visit clients.

HMRC says that you need to apportion the running costs of your home on a “fair and reasonable” basis between the private element of that cost - the part that relates to you actually living there - and the business element. But how do you do this?

One method is to work out how many rooms you have in your home and identify how many of those rooms you use for business - and also calculate how much time you actually spend using these rooms for business.

Say there are 10 rooms in your home. You only use one for business, and 90% of the use of that room is for business. You would add up all the costs that you can claim (see below), divide by 10 and then calculate 90% of that figure in order to get the accounts figure for the business use of your home.

Bear in mind that if you use any part of your home solely for business activities, capital gains tax will be due on that part if you sell your home.

What running costs can you include in your accounts?

Here are some of the costs you might incur to run a home, part of which you may then be able to claim in your business accounts:

Mortgage

If you're self-employed and buying your home through a mortgage, you can claim a proportion of the interest only - not the capital repayment.

Rent

You can't charge your business rent when you're self-employed, because legally you are the business. But if you're renting your home from a landlord, then you can claim a proportion of the rent for your business.

Council tax

You can claim a proportion of your council tax cost. However, depending on how much you use your home for business, you may have to pay business rates rather than council tax.

Light and heat

You can claim the business proportion of your gas and electricity costs for lighting and heating in the room(s) you use for business.

Telephone and broadband

Remember that what you can claim for your telephone and broadband is not apportioned on the basis of the number of rooms in your home, but on what your actual usage of the line is.

You can claim the full cost of all your business use of the line, and a percentage of the line rental, based on how much you use it for business purposes and how much is for personal use.

Property repairs

If a property repair relates solely to the part that's used for business, you would include this cost in your accounts in full, subject to the business use of that room.

For example, if the ceiling in your office/music room was repaired for £200, you wouldn't need to divide that by 10 because the repair was only for that room – you would just multiply by 90%, and include that amount (90% x £200 = £180) in your accounts.

If the repair is to the whole house, for example a repair to the roof, you can include that in the same proportion as you would the rent or council tax – so in the example above of your 10-room house, this would be 90% of one-tenth of the repair cost.

If the repair is just for a part of the house that's not used for business - such as replastering of a kitchen - then you can't claim any part of that repair in your business accounts.

Water

If you use a lot of your home water supply for business - if you run a car valeting service, for example - then you would need to apply to the water company for this to be separately charged. You could then claim the full cost. If you don’t use a significant amount of water for your work, you can't claim any of the cost for your business.