The Method for Calculating Actual Costs:
- Work out how many rooms are in your house. Most Accountants would agree that kitchens, bathrooms and hallways don’t count for the purposes of these calculations, so let’s discount those.
- Specify how many of those rooms you use for business. Make sure you only claim for the rooms you genuinely use. HMRC take a dim view of claims for multiple rooms unless there’s a good reason (like a photographer’s dark room and office). If you just tend to flit from one room to another, our recommendation is to claim for one room only.
- Calculate your total expenses for the tax year.
- Divide your total expenses by the number of rooms in your house to get an amount per room, then multiply by the number of rooms you use for business - this is answer A.
- Work out the percentage of time you work. To do this, divide the number of hours you work in a year by the total number of hours in a year (8,760 in a normal year; 8,784 in a leap year) and multiply it by 100. This is answer B.
- Multiply Answer A by Answer B.
Let’s look at an example:
You live in a 4 bedroom house with one living room, one study and one dining room (remember, your kitchen, bathrooms and hallways have been discounted) - that’s 7 rooms. You use your study for business.
Your total expenses (fixed and running costs) for the year are £21,000.
£21,000/7 rooms = £3,000 per room x 1 room = £3,000 (Answer A)
Let’s say you worked 160 hours a month for the whole tax year, equating to 1,920 hours. It’s a normal year, so:
1,920/8,760*100 = 22% (Answer B)
£3,000*22% = £660
So you could reclaim £660 for your use of Home as an Office, excluding your business phone and internet costs.
And if you’re the visual type and would like a handy infographic, here’s FreeAgent to the rescue with their “How do I calculate my working from home expenses” sheet.