During an earlier blog posting we introduced the flat rates available to those who work from home but there is another method available. This alternative method calculates the cost of operating a home office through a proportional calculation.
If you work from home during the running of your limited company or sole trader business you will be able to claim the costs of the following as a tax deductible expense:
1. Heating costs
2. Electricity charges
3. Council Tax
4. Mortgage interest
6. Internet charges
7. Telephone charges (this could mobile and/or land line)
HMRC asks that you use a reasonable method for allocating such costs to result in a total charge for your home office.
Reasonable Method – Proportional Basis
An acceptable and reasonable method of allocating total household costs such as those listed above is to divide the total cost by the number of rooms used for business purposes or to divide the total cost by the number of hours spent working at home.
For example, if you run your business from one room within a three bedroom property then you can simply divide the total costs by three. A rent bill of £300 would in this example result in a business expense of £100 (£300 divided by 3).
If you have any further questions about home office costs and how these can be used to reduce profits and in turn reduce your tax bill email one of our accountants.