If you are one of the Laptop lifestylers, make sure you are maximising your tax savings as far as legally possible! The ‘use of home’ as office rules can be confusing. We have, therefore, set out below some advice to help guide you through the calculations, maximising your tax saving potential.
Option 1- You can opt for a fixed relief of £4 per week, no records of household expenses required, leaving you free to spend time on your business. It’s not a huge amount but every little helps!
Option 2- You can calculate a proportional cost of your home, this is more time consuming but it will give you an accurate calculation of costs incurred through using your home as an office and therefore the appropriate tax relief.
The calculation includes:
- The annual cost of running your home (Mortgage interest or rent, utilities, rates, insurance etc.) e.g. £10,000
- Split between the number of rooms available for business (excluding kitchen and bathroom) e.g. 1 out of 5
- Split between the amount of time that room is available for business use e.g. 8 hours a day, 6 days a week
Using this example the charge going through the accounts would be (10,000 * 1/5 * (8/24 * 6/7)) = £571 for 1 year
If you decide on option 2 it is very important that you do the time proportions, as if your room is used solely for business purposes you will then have an issue with capital gains tax in the future and also business rates.
If you would like any help working out what you can claim as a business deduction to reduce your tax bills please contact us on 0800 954 2099