Working From Home – what can you claim for?

If you use part of your home as an office, you may be able to lower your overall cost of doing business. Here we outline some of the things you might need to know if you intend to claim expenses.

 

Claims

Firstly, you need to think about HMRC. Don’t worry, it’s unlikely to make any enquiries so long as the claim is reasonable and consistent with the type of business being operated. Be wary that not all local HMRC officers follow this approach, so it’s important that you’re prepared to back up your claim if they ask.

A dedicated room or workspace which is exclusively for business use is a must. If it has a dual purpose i.e. dining or kitchen table, then it’s not allowable as a tax deduction.

 

Two common ways of working out how much you can claim:

1. The flat rate method

This is the easiest to work out and doesn’t require any records to be kept or evidence of expenditure. HMRC publishes flat rates each year. The current ‘Home As Office’ allowance from April 2018/19 is £18 a month, making an annual claim worth £208. Not much, but better than nothing, and takes up no time or effort to calculate.

2. The apportionment method

Apportionment is when an expense is ‘split’ between business use and private use, on a basis intended to show the portion of time used for each activity. Apportionment is generally calculated according to the floor area of your home used for business purposes.

The apportionment method splits property costs into fixed and running costs; the amount that you can claim will be based on the portion of use that you have calculated as being applied to your business, and/or the actual cost of the business part of the expense.

For example, let’s say one room in a house with four rooms (bathrooms not included) is used as an office with the following monthly expenses:

Electricity – £60 

Gas – £20  

Council Tax – £100 

Insurance – £40 

Total = £220 

One quarter of the total could be claimed each month, i.e. £55.

(Note that phone calls need to be on a business line, or claimed on a personal line using an itemised bill.)

If you use apportionment, you’ll need to keep all your invoices and receipts as evidence of the costs incurred. By adopting a sensible and realistic approach reflecting your business circumstances, you should be able to successfully handle any HMRC enquiry.

 

Remember:

  • Decide whether the weekly flat rate of £4 or the more detailed apportionment method is best for you. If it’s the apportionment method, review this annually and maintain a record of costs.

 

  • If you only use a table top while your family watches TV, you are unable to claim use of home. However, If you set aside part of your home at specific times for business use, then you are able to claim.

 

These tips are for information purposes and are just a place to start. If you want to know more, we recommend you seek advice from a good specialist Contractor Accountant such as Intouch, who will review your specific situation and provide you with the right advice to make sure you’re claiming all the benefits you’re entitled to.

 

If you’d like more information on Working From Home – download your free guide here.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

Working From Home – where do you start?

Why work from home?

Contracting and freelancing are fast becoming the choice career moves for more employees each year in the UK and it’s evident why. Being your own boss allows more flexibility and the chance for a better work/life balance. Choosing the jobs you want, and when and where you do them is also a great perk. Some might say that they choose to work from home because a relaxed atmosphere increases productivity and efficiency, while others just like to avoid office politics. There are a whole host of benefits to home working, particularly from a health and well-being point of view.

 

Making it work for you

Most contractors prefer a combination of remote and on-site working, to ensure some kind of visible presence, or because they enjoy the variety it brings. But for those wanting to ditch the office environment entirely, these are some things to consider:

 

Advantages

•Arranging your routine to suit you

•Freedom to spend time with friends and family

•Setting up your work space however you like

•No commuting saves time and money

•Less stressful environment

 

Disadvantages

•Distractions such as housework and people who share the same building

•Finding it harder to switch off

•Feeling isolated. If this is a concern, take a look at our infographic for tips on how to make those all-important connections.

 

Setting up a workspace

The beauty of home working is that you can set up your space to suit your needs. You can use a spare room, convenient corner or even under the stairs – technology means workspaces can be much smaller these days, so don’t build that garden office just yet!

Make sure the space is as comfortable and efficient as possible. Get suitable furniture such as a desk at the correct height and a chair, which is good for your posture. Try not to buy expensive equipment to start with – basics would be a computer, printer and scanner – you’ll soon find out what’s essential. It’s also useful to have a smartphone specifically for business, which you can set to voicemail after hours.

And think carefully about colour and decor, which affect your mood more than you might think.

 

Be professional about it

Communication is one of the most important aspects for making homeworking a success, so reliable broadband is a must, as is making yourself contactable and available to speak during working hours. Respond to clients promptly so they know you’re on the job – they’ll want to make sure they’re getting their money’s worth after all. And don’t be tempted to slob around in your dressing gown all day either! Clients will expect exactly the same standards as someone who is office based, and ‘getting ready’ for work will put you in the right frame of mind too.

 

Costs and claims

Due to virtually no set-up costs, working from home is one of the cheapest ways to start a business. If you’re intending to claim expenses through your Limited Company, your home office should be adequately arranged to indicate that it’s a genuine business and not part of your normal domestic arrangements i.e. working from a dining table the family eat at every evening.

It’s also not sufficient to spend a few minutes a week on admin, you actually need to be working at your home office and generating income to justify a claim.

We’ll discuss more about this particular topic in our next blog, but in the meantime a good Specialist Contractor Accountant like Intouch will be able to advise on Home Office Deductions.

 

If you’d like more information on Working From Home – download your free guide here.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.