How much can you claim, for using a room in your home for business purposes?
HMRCs guidance uses typically vague words such as ‘fair & reasonable’ and ‘modest or excessive’. The trouble is someone earning mega money will think one figure is fair and reasonable but to most of us the same figure would seem excessive.
HMRC believes just £4 per week is all that should be claimed for the use of a home office. This measly amount is deemed as a ‘significant’ expenses and any claim over this amount must be justified by providing records or demonstrating your calculations.
How to can claim over the £4 per week
One way to prove your claim is reasonable is to calculate your monthly outgoings for gas, electric, rent, water etc then divide this by the number of rooms in the property (excluding kitchens & bathrooms). For example if you have 5 rooms (Lounge, Dining Room, 3 Bedrooms) and one is used as an office take 1/5th of these bills.
If this amount seems too substantial for your business use you could divide it down further by the number of hours you spend in it working each day eg, 8/24 hrs or by the number of days per week that you work or by square meterage if known.
Be careful if claiming for more than one room as you will need more justification but it is possible ie a photographer could have an office and a darkroom (days before digital).
You should never claim the room is ‘solely’ for business purposes as this could lead to a business rates claim by the local council for part of your home or even Capital Gains Tax when you sell your property. Most people’s home office also doubles as a spare bedroom or is home to the unused exercise bike or the kids use it for doing their homework.
If you run your business through a Limited Company you can draw up a lease agreement so your company is reimbursing you for the costs of the room thus reducing your Corporation Tax but again, to be exempt from Capital Gains Tax when you sell the property make sure the agreement doesn’t state that it is solely and exclusively for business purposes.