If you work from home, some of the cost of running that space is a business expense. The idea is simple: you can claim the extra costs you incur because you work there, not the ordinary costs of having a home. Getting the distinction right keeps the claim clean.
The extra cost principle
The test is whether a cost has risen because of your business. Heating, lighting and a share of your broadband often have. Your mortgage, council tax and general decoration usually have not, because you would pay them whether you worked there or not. Claiming the difference, not the whole bill, is the heart of it. A cost that would be the same whether or not you worked from home is not an extra cost, however convenient it might be to claim.
If you run your business through a limited company, the approach is a little different again, and it is worth checking before you claim.
Two ways to work it out
There are two common approaches, and both are acceptable when they are reasonable and supported by records.
The simpler approach uses a flat rate based on how many hours you work from home each month. It is quick, needs no pile of bills, and suits people who want an easy figure on their return. The more exact approach works out the actual extra costs and claims a fair business share of them, usually by the number of rooms or the floor area used for work. It can give a better result, but it asks for better records. Whichever you use, be consistent and be able to explain how you arrived at the number.
What people commonly claim
Within the extra cost principle, the usual items are well understood.
- Heating and lighting for the hours you work at home.
- A business proportion of your broadband and line rental.
- Business phone calls, as distinct from the line rental.
- Business insurance and any equipment you buy for the work.
- Stationery and small office supplies used for the business.
Keep the evidence. For a flat rate claim, that means a note of the hours; for an actual cost claim, that means bills and a clear calculation of the share you have used.
Common mistakes
The mistakes tend to be the same ones. People claim the full broadband bill when only part is business. They claim a room as an office when it is really the kitchen table. They forget that a cost has to be for the business, not simply incurred at home. And they keep no notes, so a reasonable claim cannot be explained later. A clear note of how you reached the figure is worth more than a large claim you cannot explain.
None of these are hard to avoid. Keep your business and personal spending separate where you can, note your working hours and keep a folder of bills. If you are unsure whether something counts, ask before you claim rather than after, and keep the answer with your records.
