Sole traders working from home can claim working from home expenses through your self-assessment tax return. We discuss the options available and how much you can claim.
As a sole trader in the UK, you have two options when it comes to claiming working from home expenses: you can claim working from home simplified expenses or you can work out the actual business costs of your home expenses and claim that.
Whichever option you choose, it’s worth noting that if you have a room set aside exclusively for business use, this can have capital gains tax implications when you come to sell your house. Making sure rooms have a dual purpose such as an office/guest bedroom or office/music room can alleviate this.
To discuss your individual circumstances please get in touch with Lava Sky Accounting today.
Working from home simplified expenses
Simplified working from home expenses offers sole traders a flat rate is for household running costs and are dependent on the monthly hours you work. For the 20/21 and 21/22 tax year this is:
| Hours of business use per month | Flat rate per month |
| 25 to 50 | £10 |
| 51 to 100 | £18 |
| 101 and more | £26 |
So, if you work for more than 101 hours a month this works out as a flat rate of £312 a year. Although this may not sound much, the advantage of this method is you do not need to calculate your actual cost and provide evidence to HMRC by way of receipts or invoices.
This flat rate doesn’t prohibit a separate deduction for fixed costs such as council tax, insurance and mortgage interest, where an identifiable proportion can be attributed to business use.
It also doesn’t include phone or broadband expenses so you can still claim your business portion of these on top of this. See the below section for more details on how to claim expenses like these.
Calculate your actual business costs
Alternatively, you can calculate the actual business costs of your household bills and home expenses. This includes but is not limited to:
- Utility bills – electricity, heating, water
- Telephone and internet
- Council tax, insurance and mortgage interest
- Cleaner
- Repairs and maintenance
It’s important to remember that you can only claim the business element. You need to keep copies of all bills and invoices and show how you apportioned the business element. There are several principles that can be applied – such as floor space apportioned or time apportioned – and each will be dependent on the individual circumstances.
Working from home example:
Dean is an illustrator who works from home. He uses his spare room as his office during the week. This room makes up 10% of his home’s floor space and he uses it for 5 days out of 7 a week. His total household electricity bill for heating and lighting for the year comes to £700. 10% for 5/7 days equals £50.00. This is the business element of Dean’s electricity bill, which is an allowable expense.
Lava Sky Accounting offers bookkeeping and accounting packages for sole traders so you do not need to worry about claiming your expenses and can concentrate on your business. Book a free consultation to find out more.