There is a significant increase in the use of the home as an office. Many people who were going into the office are now forced to work from home and may continue in the future.
Due to the increase in costs, there are expenses you can claim for both self-employed and employed. We will look at these and provide a calculator and an Excel template. There are lots of rules on allowable expenses; we look at the main ones in this article.
Use of Home as an Office – Self-Employed
If you are self-employed and use the home as an office, you can claim expenses. There are two methods of calculating your claim. You can use either the simple method or calculate the full cost and calculate the claim’s proportion.
To use the simplified expenses method, you must work at least 25 hours per month from home.
If you are calculating the full cost, we have provided an Excel template. Complete instructions, example and download are all available from this article.
By claiming office expenses, you will be better off and reduce your tax bill by increasing the business expenses.
Use of Home as an Office – Employed
There is a flat rate scheme of £4 per week for which you do not need receipts. It is an allowable expense, so there is no additional tax to pay.
There are also other expenses to claim. Further information is available at https://www.gov.uk/tax-relief-for-employees/working-at-home.
Employed home as an office 2020/21
Due to the Coronavirus, more people are working from home in the tax year 20/21; you can claim tax relief. The claim is for a whole year, even if you have only worked one day from home.
How can I claim the tax relief?
There are two ways to claim:
- From your employer – they can pay £6 per week extra tax-free. Although this is an easy method, many firms can’t afford to pay.
- Claim tax relief on £6 per week from HMRC. For a 20% taxpayer, this is £1.20 per week. To claim £6 per week, you do not need to keep receipts, but you will need to keep the evidence if you claim it is for more.
Visit gov.uk to claim for the use of home as an office. They have provided a simple online questionnaire; if you are eligible, they require your National Insurance Number and a recent payslip, P60 or UK Passport.
Full details are available on the Money Saving Expert website.
Use of Home as an Office Flat Rate
All the following information is for the self-employed. We will start by looking at the simplified expenses or flat rate method. You can only use the simplified expenses method if you work at least 25 hours at home per month. Calculate the rate that you claim by the number of hours worked from home each month.
Below are the flates rates provided by HMRC based on the number of hours worked from home each month.
|Hours of business use per month||Flat rate per month|
|25 to 50||£10|
|51 to 100||£18|
|100 and more||£26|
The numbers of hours may vary from month to month.
An example is a builder who works from home to order goods and put quotations together. For 10 months, the builder only works 30 hours from home, but the other two months, you work 55 hours. The claim for the year would be 10 @ £10 and 2 @ £18. Total claim £136.
You can use the simplified self-employed expenses calculator below. Against each rate enter, the months worked from home.
Use the Government simplified expenses checker to see if you are eligible. The checker requires the following information:
- Vehicle if used for business
- Using home for business or living on your business premises
- The average number of hours a month working from home
- Cost of home expected to claim as a business. Use our spreadsheet below to calculate this.
The calculation will provide an estimate of both the simplified and claiming percentage of expenses.
Actual Costs Method
The second way to claim home office expenses is to claim a percentage of the actual costs if you are self-employed. This method is more complicated, but it may increase the amount claimed and reduce the tax bill for some.
Costs that can reduce your taxes
By claiming back home office expenses, you may reduce the amount of taxes paid to the Government, so it is worth taking your time to calculate each cost.
To calculate the actual cost, it will require knowing the costs for the following:
Mortgage – You can only claim a proportion of the interest-only. Check your mortgage statement to find the correct amount.
Rent – If you are renting your home from a landlord, you can include rent in the calculation.
Council Tax – You can claim part of your council tax as part of a home office. If you are using your home as more than an office, you may need to pay business rates. There are rules, and it is worth checking on https://www.gov.uk/introduction-to-business-rates/working-at-home
Lighting and Heating – Check your utility bill for the amount spent on gas and electricity. Include utilities in your calculation if self-employed.
Telephone and Broadband – It is calculated differently from other expenses. The calculation is based on the actual use rather than a proportion on the house. An example is the broadband for the home is £30 per month. The business uses broadband 50% of the time. The claim is, therefore, £15.
If you have a separate line for the business, the whole amount is allowable.
Property Repairs – This is more complicated. If a repair is for the whole house, include the proportion if you think it affects the business. An example might be a roof repair.
It the repair is nothing to do with the area you use, you can’t include it.
If the repair is specifically for the business area, include it in the claim at the percentage of the room used for business. An example is if you need to redecorate the room.
Insurance – If you have separate business insurance, claim the whole amount but do not include home insurance. If you do not have separate business insurance, include a proportion of the home insurance.
Home Office Deduction Worksheet Excel
Our home office deduction worksheet in Excel is an easy to use template. The download is available at the bottom of this page.
Instructions for the use of Home Office Template
- Download the template and save a copy
- Using the list above of the allowable expenses, calculate the figure for each
- Enter the number of days used on average per week for the business. If you use the room for 2 weeks at 2 days and 2 weeks at 1 day, the average is 1.5 days.
- Enter the house’s number of rooms, only include the living areas, e.g. lounge, dining room, study/office, bedrooms.
- Enter the number of rooms used by the business – If it is a shared room, it may be a fraction.
- On completion of entering all the details, the totals will calculate automatically for each month and year.
The figures are then available for claiming and posting to your accounting software.
Below is an example of the home office expenses template for taxes:
The above example shows the following:
- A claim of £1000 rent per month
- The Direct Debit for council tax (only pay for 10 months)
- Direct Debit for insurance, gas and electricity
- 6 Rooms in the house (3 bedroomed, lounge, dining room and study)
- 1 room dedicated to home office use only
- The total claimed for the year is £293.54
Free Home Office Expenses Template
By downloading our free Excel home office expenses temaplate you agree to our licence agreement.
If you are unsure of what is allowable for your business home expense claim, speak to an accountant. An accountant is in a position to advise of the best method to make a claim. One advantage of using an accountant is that they can recommend of any other savings on taxes.
There are other expenses that you may incur personally that are claimable from the business. We have produced a full guide and expense template to assist you.
If you use your vehicle for business use, we have created a simple mileage log.
Return from use home as an office to bookkeeping templates.