Use of Home Allowance Calculator for Self-employed

If you’re working from home, you’re likely to spend money on electricity, heating, rent, internet, and more. Whether you’re a freelancer, a sole trader, or running a limited company, you can actually claim some of these expenses as business costs and that could help reduce your tax bill.

There are two main ways to work out what you can claim: the Simplified Expenses method or the Actual Costs method. Each has its own advantages and disadvantages, and the best choice for you really depends on how much time and space you dedicate to your work.

Our Work from Home Allowance Calculator makes it super simple to work out your home office allowance. Just enter a few details, and you’ll get a clear idea of how much you could claim with either method. This can help you pick the most tax-efficient option and ensure you don’t miss out on any savings.

Give it a try, it only takes a minute, and it could save you a hundreds!

The work from home allowance is a way for self-employed people in the UK to claim tax relief on the costs of running their business from home. It covers a share of household bills like electricity, gas, rent, internet, and council tax - expenses that tend to rise when you’re using your home for work.

This allowance is classed as a valid business expense, which means it helps lower your taxable profit. By deducting these costs from your earnings, you end up paying less income tax.

It’s mainly for self-employed sole traders and limited company directors who use part of their home to run their business - whether that’s a spare room, a home office setup, or even a kitchen table.

‍Home Office Deductions for Sole Traders

• If you're a sole trader or self-employed and use a part of your home for business purposes, you may be eligible for deductions related to the expenses associated with your home office.
• Common deductible expenses may include a portion of your utility bills (e.g., electricity, heating), rent or mortgage interest, council tax, and maintenance costs that relate directly to the area used for business.
• To claim these deductions, you'll need to calculate the proportion of your home used for business purposes and apply that percentage to the relevant expenses.
• Keep detailed records of your expenses and document how your home office is used for business purposes.

Home Office Expenses for Limited Companies

• Limited companies can also claim business expenses related to using a part of the director's or employee's home for business purposes.
• As with sole traders, expenses may include a portion of utility bills, rent or mortgage interest, council tax, and maintenance costs directly related to the business area.
• The company can reimburse the director or employee for these expenses, which can be tax-deductible for the company.
• The director or employee must keep records of the expenses and demonstrate that the use of the home is necessary for business purposes.

Renting Your Home to Your Business

• In some cases, you might rent part of your home to your business. If this is the case, you must ensure that the rent charged is at a fair market rate, and the rental agreement should be formalized in writing.
• The rental income received from your business would be included in your personal income as a sole trader. For limited companies, the rental income would be a company expense.

Work from Home Allowance Calculator

Our Work from Home Expenses Calculator is built to help self-employed people quickly work out how much they can claim for using their home as an office.

Start by selecting your business structure:

• Sole Trader
• Limited Company

Now choose between the two methods:

1. Simplified Expenses Method
2. Actual Costs Method

Just use the buttons to switch between the two methods. Fill in a few details, and the calculator will workout the home office allowance you can claim.

1. Simplified Expenses Method

This method is based on the number of hours you work from home each month. HMRC provides flat rates you can use without needing to work out your exact bills.

Input fields:

Number of hours you work from home each month

Output:

The calculator shows your estimated flat-rate use of home as office allowance for the year based on HMRC’s fixed rates.

2. Actual Costs Method

If you use a larger part of your home for business or your bills are high, the actual costs method might give you a bigger claim. You’ll need to enter your monthly household expenses and the share used for work.

Input Fields:

• Total number of rooms in your home
• Number of rooms you use for work
• Percent of time rooms used for business
• Your monthly rent or mortgage interest
• Monthly utility bills (electricity, gas, water, broadband, etc.)
• Insurance
• Internet
• Repairs

Output:

The calculator works out your monthly and annual total deductible home office allowance for the year using the percentage of business use you entered.

Which Method Should You Use?

When the Simplified Method Works Best

The Simplified Expenses method is a good choice if:

• You work from home for 25 hours or more per month
• Your household bills are fairly average
• You don’t want to spend time calculating your exact costs

HMRC sets a flat monthly rate depending on how many hours you work from home. You don’t need to keep receipts for this method. It’s quick, simple and often works well for part-time freelancers or those who use a shared room for business tasks.

When to Consider the Actual Costs Method

The Actual Costs method might be better if:

• You use a whole room or dedicated space for work
• Your bills are high due to heating, rent, or broadband
• You work from home full-time

With this method, you calculate the portion of your home costs that relate to business use. This includes rent, electricity, water, internet, and council tax. You divide the costs by the number of rooms and the time spent working, giving you a more accurate figure.

If your business use takes up a large part of your home or your bills are much higher than average, this method could result in a larger claim.

Can I Switch Methods Each Year?

Yes, you can switch between the Simplified Expenses method and the Actual Cost method each tax year, depending on what suits your business best at the time.

HMRC allows self-employed individuals to choose the method that works for them every year. You're not locked into one method forever. This gives you the freedom to adjust based on how much you're working from home, how high your bills are, or if your home setup changes.

Need Help With Self-Employed Taxes?

Figuring out your home office expenses can be a bit of a hassle especially if you're not sure which method will give you the most allowance to claim. An accountant for self-employed analyses your business setup, helps you understand what you can claim, and ensures you take advantage of every possible deduction.

Why not book a free call with a self-employed accountant today? Let’s work together to make sure you get what you’re entitled to, without any guesswork!

FAQs on Use of Home Calculator

How do I claim use of home allowance?

You can claim home office allowance by including it as a business expense in your Self Assessment tax return. Add the total amount to the expenses section when filling out your tax return.

What expenses can I claim for working from home self-employed?

If you’re self-employed and work from home, you can claim part of your household costs as business expenses. These may include rent or mortgage interest, electricity, gas, water, internet, phone bills, and council tax. You can also claim for repairs and maintenance on the part of your home used for business.

Can I claim if I work from a shared space?

Yes, you can still claim if you work from a shared space in your home. You’ll need to work out the share of household bills that relate to your business use.

Is it better to claim actual costs?

Claiming actual costs can give you a higher tax relief if your home expenses are high or you use a large part of your home for work. If your setup is simple, the flat-rate method might be easier and still give a fair amount.

Can I claim rent and mortgage payments?

You can claim a share of your rent if you’re self-employed and work from home. If you own your home, you can’t claim mortgage payments, but you can claim a portion of the mortgage interest.