The most recent prediction is that it could take at least six months before the UK regains a state of normality, meaning that working from home will most likely be in your foreseeable future. 

There are some positives, working from home doesn’t only enable business continuity but also allows you to keep overheads down.  

Additionally, you’re able to claim tax relief for home expenses if you run your business from home. 

All you need to do is use a ‘reasonable’ method to calculate your expenses, which we’ll cover in this blog: 

Calculating your working from home expenses  

Calculating the expenses for your home usage can be broken down into four simple steps: 

Step 1 

Firstly, determine how many rooms you have. 

HMRC defines any ‘normal living space’ as a room, excluding bathrooms and hallways, so your bedrooms, kitchen, living room and dining room would all count. 

It’s important to state that if you have a room dedicated to business use, you’ll have to pay Capital Gain Tax on that room when you sell your home. Top tip, if you have a dedicated business room, try using it for something additional like a workshop or game room. 

Step 2 

The second step is to calculate the percentage of use for each of your previously determined rooms. 

For example, if you spend 8 hours a day working in your office and 2 hours playing games in there, your percentage of use is 80%. 

This needs to be done for each room you work in. 

Step 3 

Now you need to divide each bill by the total number of rooms. 

Typical bills include rent, council tax, heating, electricityhome insurance (if it covers your business) and the interest on mortgage payments (but not the capital). 

Also, services such as broadband and phone lines need to be calculated based on the percentage of business use. 

Usually, you can only claim the cost of calls/use and not the line rental cost, unless you’re able to prove you’ve only installed the internet/phone line to work from home. 

As an example, your applicable bills total £500 per month and you have 5 ‘normal living spaces’, it works out at £100 per room.  

Step 4 

Now you have your room cost and work use calculated, you’re able to bring these numbers together for a calculation. 

Using the example in this blog, the spend in the office would be £80 (£100 x 80%). 

This figure shows your business usage cost and the amount you’re able to claim in working from home expenses. 

Flat rate calculation  

If you don’t fancy this calculation each month, HMRC offers a simpler process to calculate your working from home expenses. 

They offer a flat rate calculation using a fixed amount which varies on the number of hours you work from home each month. 

Average number of hours spent working from home per month Amount of tax relief you can claim per month 
25 – 50 £10 
51 – 100 £18 
101 + £26 

 

This flat rate calculation can only be applied to heating and electricity, it’s also worth bearing in mind that this flat rate may be less than what you pay, meaning you end up paying more tax. 

Additional resources  

Hopefully, the blog has been useful and will enable you to claim additional tax relief if you have to run your business from home for the foreseeable future. 

For more information on how you can maintain business operations during these uncertain times, check out our support hub and to request a free trial of KashFlow, click here. 

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