It’s not uncommon these days for people to work from home and run their businesses from home too. These days more than 4 million people work from an office in their home, working anything from one to five days a week minus the dreaded commute.
There are loads of perks to working from home (not least working in your pj’s if the mood takes you!) and if you run your business from home you’ll be entitled to a deduction (tax relief) for the extra expense this brings in terms of both fixed costs and running costs for your home. Fixed costs
Typical fixed costs are classed as those you have to pay regardless of the type of business you run from home and they include:
- council tax
- mortgage interest
- insurance (buildings and contents)
- ongoing repairs and maintenance
A reasonable proportion of each of these fixed costs can be deducted as a form of tax relief when working out the profits from your business.
You can claim relief for fixed costs if you use an area or room of your house for business – but remember to make sure this space is available to the rest of the family at non-working times such as evenings and weekends or it may impact capital gains tax.
As well as fixed cost deductions, a proportion of the running costs of your home can also be deducted too when you use your home for running your business.
Running costs include things like electricity, gas and water and you’re allowed a deduction for the amount you use for your business while working from home.
There are different ways of working out your business fixed costs and running costs as separate to your own private usage. As an example, if you work out the total number of hours you spend in your home office during the week you can estimate the amount of electricity or gas used in relation to your total bill.
It’s important to remember that you can only claim for things specifically related to work such as business phone calls and the extra cost of gas or electricity. You can’t claim for things you use for both private and business use like broadband access or rent.
It’s also worth noting that you don’t need to provide records for claims of up to £4 per week (£18 per month) but for claims over this amount you’ll be expected to have proof of what you’ve spent so it might be best to stick to the simple (and hassle-free) £4 a month flat rate!
If you’d like to find out more information about fixed cost tax relief for your home office, our experts at Inform would love to help you make the most of the tax reliefs available when you run your business from home.