If you work from home, what do you deduct as an expense?

[MarshaBrady]

Ie expenses. How do you work out what to deduct, if anything.

Have gone blank on what you do.

You're all doing your tax returns aren't you.

There's another thread running in this topic on exactly this subject. This is an area where a competant expert can save you thousands of pounds, but if you get it wrong you could risk an even greater sum. Take a look at the link on the other thread (if you can fight through the somewhat strange crossed wires in the conversation) and come back if you have any specific questions.

Ok found it thanks!

For some of us- me included- our earnings don't run into thousands of pounds after taking into account the personal allowance, so what I'd save with an acct is questionable. I expect I'd pay around £300 or more for their help, and it's a close call whether they could save me that in tax.

There is a lot of info online and if anyone is in the creative arts, the Writers' and Artists' Year Book has a complete and very detailed chapter on this, written by a financial expert.

I did have an accountant. But have opted out for last year.

It's so easy to do online, I found it ok to do.

Jimmy that figure is waaaay out. I paid £100 for my first tax return (when I really didn't know what I was doing) and £30 this year when all I needed was a twenty minute slot to ask specific questions. Worth it for the peace of mind imo.

It might be waaaaaaaaay out to you but I can name people- friends- who pay that. I'd have guessed most accountants would charge £50 an hour?

I was quoted £300 last year. I did it myself! I don't earn enough to justify it tbh and dh's accountant checked it over for free.

I do some freelance consulting and claim business related phone calls, travel expenses for client meetings, stationery (inc printer ink). Professional fees & insurance if you have any. Also on the advice of an accountant I claim a flat rate of £5 per working day to cover other utilities.

Oh I also claimed for laptop repairs and new laptop (there is an allowance for capital purchases up to a certain amount)

Depends what you work as.

I'm a freelance copywriter. I claim just for the electricity I use.
What you are supposed to do is calculate the total cost of running your home. So how much do you pay each year for your mortgage/heating/water/council tax/insurance. Say this is around £3k a year.

Now add up all the rooms in your home. I have 6 rooms and I work in the living room so I take up around 10% of the house.

10% of £3k is £300 so you can claim £300 for expenses.

When claiming expenses for a business you run from home however, be careful. If you have an office that you work from then this may affect your insurance and you could be liable for capital gains tax should you sell your home. The room where you work must also be used for other purposes. So I work in the living room which is obviously a communal room and not used exclusively for my business.

You can also deduct admin fees for printing stationery for example, business cards and part of your phone bill. Same goes for computing and repairs. Any expenses related to your business can be deducted.

See the HMRC guide on this.

I don't earn enough to pay tax anyway

Thanks everyone, really helpful.

Deduct anything that you have to pay for to be able to run your business. I think you are allowed to deduct a percentage of your utility bills gas, electric phone etc as you are using these while working from home.You are also allowed a certain amount for wear and tear on your home. The best thing to do is to contact the C.A.B if you are unsure about anything.

Yes, the HMRC guide is worth starting with. The point above about capital gains tax is good and also working out what % of your house is for work.

Also look at the lists on the self assessment tax return which ask you to list expenses in certain categories (I think it is more detailed once you earn over a certain amount) and they ask for the sums for business travel/car, work insurance policies, heating, lighting, stamps. We have a separate work internet line/account and telephone and fax line here so those are just for work. You might pay people to do some things for you to do with work. You might subscribe to work journals on chemistry or whatever your expert field is etc etc.

TheRhubarb- that sounds a conservative figure. If I add up our council tax, water rates, house insurance,mortgage interest, gas and electric it comes to over £7K.

I am working on the basis that I work a 10 hr day for 46 weeks of the year, minus 52 days (Sundays)

I am calculating on the basis that 1/7th of my house is used for work, ( 4 beds 3 receptions) and the room is used by me for 95% of the time- as a study and a book store/library for rest of family.

I am calculating the daily 24 total for all of the above household expenses then dividing that by the number of hours I work in a year.

is that okay :)

No idea Choo old pal. I am shit at maths.
I got that advice free from an accountant. It was simple enough for me to understand.

If I try and do your maths I would get a headache.

There are benefits you see, to not earning enough to pay tax in the first place. One of which is I don't have to do all these complicated workings out. But I did for one year and I managed just fine so if someone with number dyslexia can do their own accounts, so can everyone else.

@Xenia you only have to break down your expenses into categories on the tax return if you earn over £73,000. But the categories are VERY unhelpful - they are not designed to prompt you as to what you can claim, they are designed to highlight to HMRC certain expenses that they may want to investigate further! So if accountancy, legal and other professional fees are relatively high this might indicate that there are some legal fees realting to a capital item which should not be claimed, car, van and travel expenses may include non-business travel or private car expenses etc., but costs of goods bought for resale or goods used isn't usually worth looking at. But where do you put common business expenses like advertising or delivery charges? Where does a builder put subcontract costs which may be 90% of her total costs?

Just for the record MRV- are you an accountant? And if so why aren't you madly at work doing tax returns? :)

@MrsJimmyChoo @THERhubarb that is nearly there, you need one more step.

So with MrsJimmyChoo's figures, she uses the study for 60 hours each week exclusively for a business purpose. From the 95% given I assume she uses it 3 hours for a non-business purpose. This may not be enough to prevent the room from being excluded from Private Residence Relief which may result in a large Capital Gains Tax liability, but ignoring that for the moment this indicates that the costs relating to the room (1/7 of the total costs for the property that can be allowable expenses) can be apportioned 60/63 as to business use.

"why aren't you madly at work doing tax returns?"

Because I point out to my clients the benefits of filing their tax returns earlier in the year and work with them to achieve that

The only benefit I can see is that George Osborne gets my money earlier rather than it being in my bank account for as long as possible.

I don't understand your 60 hrs/ 63 hours- there are 24 hrs x 7 days in a week- not 63hrs. People who are s/e tend to work most days - I do- and don't just do 9-5 x 5 days a week.

I think most people manage it pretty well without accountants and things are never as complex as people make them seem.

Also I suppose with house pricing dropping for some and a lot of negative equity about you might want part of your sale price to be classed as a capital sale and claim capital losses actually against any capital gains (although I agree that over time it ism ore likely you would make a gain). Do we know anyone charged capital gains tax on a house sale who eg was a writer working from home or maths tutor? In theory they ought to be charged but are they?

mrsJimmy you can file your return earlier and still pay your bill at the end of Jan - you don't have to pay when you file. Avoids the last-minute panic and means you know exactly what you owe as well. Not that I've ever managed it but I imagine that must be helpful

"I don't understand your 60 hrs/ 63 hours- there are 24 hrs x 7 days in a week- not 63hrs"

Yes there are 168 hours in a week, but this room is only being used for 63 of them.