Household bills are increasing but what can I claim back from my business for working from home as a sole trader?

The UK has seen a significant increase in energy costs with most households on variable tariffs, and some households penalised for their energy provider going bust and being switched to one of the bigger companies.

As a sole trader (but not as an employee) you can use the simplified expenses claim in your business, to claim the following amounts as an expense against your profits:

Hours of business use per month             Flat rate per month

25 to 50                                                                £10

51 to 100                                                              £18

101 and more                                                    £26

https://www.gov.uk/simpler-income-tax-simplified-expenses/working-from-home

But these rates are not going to cover the energy bills alone!

If the average household has 6 rooms and 1 of these rooms is used as an office, with energy bills predicted to increase to £3,600 this winter that would equate to £3,600 x 1/6 = £600 and the maximum simplified amount that could be claimed is 12 x £26 = £312, so just over half of the actual cost.

Can I claim more back from my business, is there an alternative method?

The answer to this is yes you can.

BIM47820 – Specific deductions: use of home: specific expenses

Fixed costs

Council Tax – Allowable in those instances where other property-based expenses are deductible. See BIM46840 for more detailed guidance.

Mortgage interest – Interest element only, multiplied by business proportion of the premises; repayments of capital strictly not included. If the cash basis is used the amount allowable may be restricted see BIM70040.

Insurance – Separate premium 100% allowable or additional business cover proportion of existing household premium.

Rent – Proportion used for business purposes, see BIM38110

General repairs – Proportion used for business purposes for general redecoration or repairs to exterior or repairs to roof. However, all repairs such as repainting room used for business, putting in new lighting or replacing a bling is fully allowable as wholly and exclusively for the business. See BIM46900

If part of the home is set aside solely for trade use for a specific period, then a part of these costs is allowable. It will normally be appropriate to apportion these expenses by area and time.

Running costs

Cleaning – Cost for cleaning that room or apportionment of total household cost.

Heat, light and power – An apportionment of the household rooms used may be appropriate, alternatively with most households having smart meters it may be easier to monitor these costs during the day if working from home.

Also, this may depend on the type of trade for example a recording studio setup in one of the rooms of the house is likely to draw a lot more electricity than one-sixth of the total household heat, light and power bills.

Telephone and Broadband – If you have a separate business line this is fully allowable. If there is no separate business line a proportion of the land line can be added to the business calls based on the proportion of total incoming and outgoing calls.

The broadband costs can be apportioned using same percentages as the landline costs.

Water rates and metered charges – The costs should be apportioned for business purposes; this is likely to be extremely low if an clerical business and would only include refreshments and washrooms used whilst working for the business. If only writing up books, then none of the charge can be included.

However, there may be an instance such as a car valeter working from home who fills a tank in his van with cleaning water before going to the client’s premises or who cleans cars at their home. In this case it would seem reasonable to calculate the units used by the business and apportion the supply and wastage costs.

Make sure you have clear and accurate calculations for business usage, and you can claim the actual costs rather than losing out in times of rising overheads!

Related News Articles

Navigating Tax Changes: High-Income Child Benefit Charge and Other Updates 

THE HIGH-INCOME CHILD BENEFIT CHARGE In an effort to reduce unfairness, the thresholds for the high-income child benefit charge (HICBC) will be increased from 2024/25. You may have to pay the HICBC if you are considered to have ‘high income’ and child benefit is being paid in relation to a child that lives with you,…

CIOT Responds to HMRC Regarding the Current Problems with R&D Tax Relief

In the summer of 2023, HMRC and the Chartered Institute of Taxation (CIOT) exchanged lengthy correspondence about the approach being taken by HMRC relating to R&D tax relief claim compliance checks. The CIOT expressed concern about a number of tactics being employed; HMRC’s response was to largely defend the measures being undertaken. Several months have…

The VAT threshold: Should it be changed, and do I need to register for VAT?

The current UK VAT threshold is £85,000. This threshold is due to stay in place until at least April 2016, meaning that by that time the VAT threshold will not have changed for at least 9 years. On our advice line, we receive queries daily from businesses that want to remain below the VAT threshold,…