ameliagrey
Mon 23-Jan-12 19:55:25
can anyone help me with this please?
I have kept evidence of outgoing expenses, apart from the use of my home. I cannot find anything on the HMRC website about how to work this out- compared with the easy to find stuff about milage allowance.
Is there a tool you use to work out the expenses as a percentage of the utility bills etc, or a flat fee per hours spent working etc?
Next year I think I will get an accountant but as my income is under £20K it has never seemed worth it.
There is no fixed formula, which is why you won't find anything on the HMRC website.
A common way to look at it is to work out how much of the house you use for business purposes and for how much of the time. So say you have 5 rooms (excluding bathroom and kitchen) and you use one do them for 5 hours per day, 5 days per week.
If you work out your total utility bill (gas, electric, council tax, mortgage interest, insurance) for the house over 12 months is £1,000, then your allowable expense is:
£1,000 x 1/5 (room proportion) x 5/24 (hours proportion) x 5/7 (days proportion)
The other approach is to claim a flat rate of £3 per day, you can do this without having to back it up with receipts.
Hope that helps.
TalkinPeace2
Mon 23-Jan-12 21:52:36
ameliagrey
Mon 23-Jan-12 22:03:45
I am working my way through the return. Does this £3 a day come under the boxes for allowable expenses or somewhere else? Can you just tell me where this £3 comes from?
presumably that amount does not get you into trouble with capital gains etc when you sell?
TalkinPeace2
Mon 23-Jan-12 22:05:36
week not day
put all of your turnover into that box and all your expenses into box 19 - do your accounts on a spreadsheet before doing it on the hmrc site
ameliagrey
Mon 23-Jan-12 22:33:45
crikey- £3 a week is nothing. Our council tax is very high let alone utilities.
TalkinPeace2
Tue 24-Jan-12 12:37:22
but your council tax is for a domestic dwelling that is mostly used for your family, not your business
have another read through my me page
Ok....
There is no fixed formula, but you can find a LOT about it on the HMRC site here.
There is no £3 a day general disregard.
Employees who need to work at home can claim £3 a WEEK (generous huh?) but this does not apply to the self employed. One of the examples a few pages down from the link I gave above, suggests that HMRC will allow a claim of £2 a week from the self employed without detailed back-up.
You can claim a proportion of council tax as part of the cost of using your home - HMRC specifically state "Council Tax, mortgage interest, insurance, water rates, general repairs and rent" as being potentially allowable fixed costs, plus of course energy, repairs and maintenance and other running costs.
There is no CGT impact as long as there is no part of your home that you only use for business purposes. So in your %age usage calculation, make sure that each room is used a material amount as part of your dwelling - storing Christmas decorations or having a party in the home office once a year is not enough.
This is a really big topic with a big potential impact on your tax position: a week before the tax return deadline is not really the time to be planning it. Submit your return on time, take your time to find an accountant you can work with and resubmit later. Having said that, if there is the possibility of a claim for previous years it would be good to get it in before 31 Jan.
Sorry, inadequate first post which I didn't follow up on. Must not post when I'm tired at night.
