Using your home for business purposes

Most self-employed professionals now work from or carry out some work-related activities at home though it is uncertain if they all know that they can reduce their tax bills with business use of home expenses.

There are 2 ways of working out the expenses you can claim from your profits for the extra running costs incurred by using your home as a business base:

1. Simplified (of fixed) method – If number of hours worked at home falls between 25 and 50 per week, deduct £10 per month; 51 to 100 hours per week at home allows £18 weekly deduction; and 101 hours or more weekly entitles you to £26 deduction. Note that these are cumulative, ie, you add up all the hours worked regardless of how many homes you work from. Running costs include utility bills, telephone and broadband services.

Using the above method still allows a business proportion of fixed costs to be deducted. Fixed costs include mortgage interest, council tax, insurance and service charges.

2. Actual method – Identify and claim a percentage of running and fixed costs. See http://www.hmrc.gov.uk/manuals/bimmanual/BIM47825.htm for examples provided by the HMRC.

REF BIM75010; BIM47800; BIM47825