Contractor's Tools

We have created an information hub to support our Orange Genie Accountancy clients, our Umbrella Employees and agencies where the the Covid-19 rules and legislation are explained for recruiters, contractors and the self-employed. Click here to find out more>>

Working from Home Expenses for Self-Employed Contractors

Self-employed

Working from home has become more normal in recent months and if you’re able you’ve probably moved at least some of your self-employed contracting work into your home office. Depending on the work you do, you may be able to claim expenses for costs associated with working from home, but the rules can be complex and it’s important to get it right.

A Contractor's Guide to Claiming Business Expenses: Click here to download>>

There are two possible methods for calculating your use of home expenses, either claiming a flat rate or analysing the costs.

The flat rate method for self-employed contractors

As a sole trader, you are eligible for the simplified accounting method, which means you’re allowed to use the flat rate method for calculating your use of home expenses. The rate you claim is based on the number of hours you spend working from home each month.

25-50 hours £10/month
51-100 hours £18/month
101 hours or more £26/month

The flat rate only includes costs for heat, light and power, so you can use this method and still claim the actual cost for other things like rent, council tax and telephone/internet. 

Using the flat rate method will usually be quicker, but it could mean that you claim less than you would if you claimed the actual cost, which means you’ll save time but pay more tax.

Example: If you worked from home for 40 hours per week for 10 months, and 60 hours for 2 months.

£10 x 10 = £100

£18 x 2   = £36

Total = £136

Analysing the costs

The other method is to claim for part of the actual running cost of your home. The cost must be apportioned on a “fair and reasonable” basis between the business element and the private element (you living in your house).

One way of doing this is to count the number of rooms in your home and identify the number of those rooms that you use for business and how long you use them for.

Example: If there are 10 rooms in your home, you use 1 for business and 90%$ of that room’s use is for business purposes.

  • Add up all the costs you can claim
  • Multiply by 1/10
  • Multiply by 90%

So, if the total of all claimable costs is £250

£250 x 1/10 = £25

£25 x 90% = £22.50

If part of your home is only used for business you may have to pay capital gains tax when you sell your home, so It’s a good idea to make sure any space you use for business is used for private purposes too.

What running costs can you claim?

It’s not possible to include an exhaustive list, but here are some examples of running sots you might be able to include in the that “total claimable costs” figure.

Mortgage or Rent

If you’re self-employed and buying your home you can claim a proportion of mortgage interest only, not the capital repayment. If you’re renting you can claim a proportion of the rent.

Council tax

You can claim for a proportion of your council tax, but depending on how much of your home you use for business you may have to pay business rates.

Repairs

If a property repair only relates to the part of your home you use for business, for example the ceiling in your home office, you can claim the full amount, subject to the proportion of business use. If the repair relates to the whole house, you would also need to divide by the number of rooms, as in the above example.

Telephone and internet

In this case you would claim for the proportion of business use of the line, rather than using the number of rooms. If you have a separate line for business use you can claim for the whole cost.

If you have any questions or if we can help in any way please call our expert team on 01296 468 483 or email info@orangegenie.com.

Request a Call Back

 

edge promo