The easiest method is to claim the flat allowance of £306 per annum, no receipts are required and this is allowed by HMRC if you use part of your house as an office. Simply claim £25.50 on your bookkeeping spreadsheet each month and it will be included in your accounts.
If a reasonable proportion of your fee earning work (i.e. not business administration but actual fee earning work for your business) is carried out at home, you can claim the actual expenses you incur relating to the running costs of your home office. Most commonly, this cost allocation is done by apportioning the costs based on the total number of rooms in your house / flat (excluding kitchen and bathroom), by the area available for business use.
Note: you will need to be able to show how you calculated the home office claims - i.e. you will need to keep your bills and a record of how you worked out the apportionment - see the examples below.
John and his ngirlfriend live in a two bedroom flat. One of the bedrooms is used for John’s home office for his business along with storing some personal items as well. The proportion of housing costs that can be claimed as business-related expenses is 1 (the spare room) divided by 3 (two bedrooms and a sitting room, kitchen and bathroom are excluded from the calculation) which gives 0.333 of all costs that can be claimed. See below for costs allowed.
Katy lives in a shared 3 bedroom flat with 2 friends. Not having the luxury of a spare room for her business, she has dedicated half of her bedroom as her home office. Because all living costs are split evenly between the 3 flatmates, the proportion of housing costs that can be claimed as business-related expenses is 0.5 (half of her bedroom) divided by 1.33 (Katy’s costs cover her bedroom, and shared 0.33 use of the lounge) which gives 0.375 of all costs that can be claimed.
If the property is rented the amount of the rent reflects the existence of the room or portion of the room that is used for business. Therefore a deduction can be permitted for a proportion of the rent paid.
If the property is owned on a mortgage the amount of the mortgage interest reflects the existence of the room that is used for business. Therefore a deduction can be permitted for a proportion of the mortgage interest paid. You can not include the capital as this is a personal asset you are purchasing.
If the room is to be used for work it must be lit and heated to the extent necessary to carry out the work.
If the room is for work it must be kept in a fit state for the work to be carried out. Unless a cleaner is employed there is unlikely to be any significant expense exclusively incurred in cleaning the room.
A room used for business contributes to the value of the house. Therefore a deduction can be given for a proportion of Council Tax.
The cost of business telephone calls made from home is deductible whether or not any part of the home is used for business use. The same is allowable for broadband internet. However if neither contract is in your business name, you may wish to apportion the business expense by using your home office percentage.
In general, water charges cannot be claimed as a business expense.
This information is for general information only. We take no responsibility for any action taken or refrained from in consequence of its contents. Always seek our professional advice specific to your circumstances before acting.