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Home-working tax-deductible expenses for entrepreneurs

Home-working tax-deductible expenses for entrepreneurs

Home-working tax-deductible expenses for entrepreneurs

Home-working is becoming an increasingly popular option for many. There are different tax rules whether you are self-employed (as a sole trader or partner), or whether you are an employee (even if you are an employee of your own company). We will be focusing only on the self-employed.

The choice

There is a choice when claiming home-working expenses:

  1. Simplified expenses – where you claim a flat rate based on the hours you work from home each month
  2. Actual expenses – where you claim the actual expenses

Simplified expenses

With simplified expenses there is no need to keep records of actual expenses. Each month, you work out the hours of business and determine the relevant flat rate.

Hours of business use per month Flat rate per month
25 to 50 £10
51 to 100 £18
101 and more £26

The relevant flat rate is determined on a month by month basis.

Telephone and internet expenses can be claimed in addition to the flat rate.

Actual expenses

Actual expenses when home-working are those which can be directly attributed to business. This means that you will need to identify a suitable proportion of household expenses which relate to your business.

Claiming actual expenses does not mean that you need to use a portion of your home exclusively for business. HMRC will accept a proportion of household expenses based on:

  • proportion in terms of area of the home that is used for business purposes
  • how long it is used for business purposes

Household costs can include rent, mortgage interest (not capital repayments), council tax, insurance, water, electricity, gas, cleaning and general repair and maintenance.

Once again, telephone and internet expenses can be claimed in addition to the above.

Further reading

https://www.gov.uk/simpler-income-tax-simplified-expenses/working-from-home

Would you like to learn more about tax-strategies?

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