Self employed tax return work from home calcs

timrichards

Hi, I've just started self employed and I'm working out how to fill out my tax return - specifically how to do expenses.

I work from home 100% as there is no office to go to. I can therefore claim expenses for:

- Mortgage Payments (£1000 per month)

- Broadband

- Council tax

- etc...

I have 4 rooms in my house and only work in 1 of them. I also only work 3 days a week.

Therefore, for mortgage:

£1000 /4 = £250

3 days a week = 14% of the week spent working (3*8 hours/168 hours)

14% of £250 = £35

Is this a correct way to calculate the expenses?

Would I have to divide broadband per room and per time spent working?

Thank you

Jeremy535897

See https://www.gov.uk/expenses-if-youre-self-employed

You can only claim a proportion of the interest element of your mortgage. You need to exclude any capital repayment element of the £1,000.

See https://www.litrg.org.uk/tax-guides/self-employment/what-business-expenses-are-allowable for a more detailed guide.

DullGreyGuy

timrichards said:

Hi, I've just started self employed and I'm working out how to fill out my tax return - specifically how to do expenses.

I work from home 100% as there is no office to go to. I can therefore claim expenses for:

- Mortgage Payments (£1000 per month)

- Broadband

- Council tax

- etc...

I have 4 rooms in my house and only work in 1 of them. I also only work 3 days a week.

Therefore, for mortgage:

£1000 /4 = £250

3 days a week = 14% of the week spent working (3*8 hours/168 hours)

14% of £250 = £35

Is this a correct way to calculate the expenses?

Would I have to divide broadband per room and per time spent working?

It can be a very slippery slope to claim things like mortgage as a business expense and plenty of people have thought they were being clever but then had to apply for Change of Use Planning Permission, found part of their home is no longer considered domestic so get hit by CGT when they sell etc etc. One forum member had to knock down the office in the back garden as there is no permitted development for commercial premises. 

Your business expenses should be those that are incurred purely for doing your business. Are you paying more Council Tax or Mortgage as a consequence?

There certainly is an argument for gas/electric etc but unless you are running CNC machines or such at home then a single laptop and a couple of LED lightbulbs use next to nothing. 

Jeremy535897

DullGreyGuy said:

timrichards said:

Hi, I've just started self employed and I'm working out how to fill out my tax return - specifically how to do expenses.

I work from home 100% as there is no office to go to. I can therefore claim expenses for:

- Mortgage Payments (£1000 per month)

- Broadband

- Council tax

- etc...

I have 4 rooms in my house and only work in 1 of them. I also only work 3 days a week.

Therefore, for mortgage:

£1000 /4 = £250

3 days a week = 14% of the week spent working (3*8 hours/168 hours)

14% of £250 = £35

Is this a correct way to calculate the expenses?

Would I have to divide broadband per room and per time spent working?

It can be a very slippery slope to claim things like mortgage as a business expense and plenty of people have thought they were being clever but then had to apply for Change of Use Planning Permission, found part of their home is no longer considered domestic so get hit by CGT when they sell etc etc. One forum member had to knock down the office in the back garden as there is no permitted development for commercial premises. 

Your business expenses should be those that are incurred purely for doing your business. Are you paying more Council Tax or Mortgage as a consequence?

There certainly is an argument for gas/electric etc but unless you are running CNC machines or such at home then a single laptop and a couple of LED lightbulbs use next to nothing. 

Whether you need a change of use for planning permission is entirely independent of whether you can claim a part of your mortgage for tax purposes. Capital gains tax main residence relief is restricted only where a room, or a separate building, is used entirely for business purposes.

timrichards

Thanks, guess this not as simple as I thought. I think an accountant is needed!

[Deleted User]

timrichards said:

Thanks, guess this not as simple as I thought. I think an accountant is needed!

Taking everything into account,  is the amount above £312 that you wish to claim significant and worth the hassle, bearing in mind that that £312 requires no record keeping whatsoever? 

timrichards

Yes with professional fees etc it will be.

Am I correct in the way I calculate expenses below? (ignore mortgage for now, I'll get advice on that).

eg- Broadband, heating = £160 per month

4 rooms in my house and only work in 1 of them. I also only work 3 days a week.

Therefore, monthly allowable to claim for these = £160 /4 = £40 for the room I am in

3 days a week = 14% of the week spent working = £40 * 0.14 = £5.60 per month ?!?

[Deleted User]

timrichards said:

Yes with professional fees etc it will be.

Am I correct in the way I calculate expenses below? (ignore mortgage for now, I'll get advice on that).

eg- Broadband, heating = £160 per month

4 rooms in my house and only work in 1 of them. I also only work 3 days a week.

Therefore, monthly allowable to claim for these = £160 /4 = £40 for the room I am in

3 days a week = 14% of the week spent working = £40 * 0.14 = £5.60 per month ?!?

I meant in excess of £312 for the use of home claim. Without looking in detail at your calculation, is £312 not simpler to claim?

When exactly did you commence self-employment?

What professional fees are we talking about? 

timrichards

Hi, I started in Sep 2023 - and professional fees are £350 for indemnity insurance for my work

[Deleted User]

timrichards said:

Hi, I started in Sep 2023 - and professional fees are £350 for indemnity insurance for my work

If you only started in September 2023 your first return will be for 2023/24 which cannot be completed until April 2024 with a submission deadline of 31st January 2025. 

If you mean ‘September 2022’ you need to apportion your calculations for the part of the tax year that you were actually self-employed. 

As I said - is there much difference in claiming £6 per week for the use of home portion of your expenses?

sheramber

timrichards said:

Hi, I started in Sep 2023 - and professional fees are £350 for indemnity insurance for my work

Are these fees to a professional body on the HMRC Approved List?