Allowance and expenses
If you have a home office, you may be eligible to claim taxable expenses, which could reduce the amount of tax you owe.
Self-employed contractors and freelance workers are able to claim certain taxable expenses, including payments and investments they make to enable them to do their job.
Examples include materials and equipment, but you can also claim expenses if you work from home.
It’s worth noting that every expenses claim is different.
If you do work from home, it’s helpful to use a calculator to enable you to work out how much you could claim and ensure your tax return is as accurate as possible.
There are two options when calculating home office expenses.
You can either break down costs individually, or claim a fixed rate fee, which is determined by the number of hours you work at home per month.
Office rent and rates
If you rent an office, you can claim this as a taxable expense.
If you work from home, and your office is used solely for business purposes, you can claim a portion of any rent or mortgage payments.
The amount you can claim depends on how many hours you work from home per day, and how many rooms you use.
If you work full-time from your home office, you’ll be able to claim more than you would if you had part-time hours.
If you have a home office, you can take expenses such as rent or mortgage payments into account.
But you can also factor in working costs, and include:
- Council tax
- Water bills
- Home insurance
- Gas and electricity
- Any repairs or maintenance work that is required
To calculate how much you can claim in taxable expenses when you have a home office, you’ll need to consider :
- Hours you work per day
- Number of rooms you use
- How much you pay for the expenses listed above.
What you can’t claim
You won’t be able to claim the whole of your electricity bill as a taxable expense.
For example, as you’ll use most of the electricity to power rooms you don’t use for work and to run appliances for private use.
As a general rule, you can formulate a calculation by taking the total cost of your working expenses and dividing it by the number of rooms in your house.
And then multiplying this figure by the percentage of time you use rooms for business purposes.
Using a flat rate provided by HMRC is simpler, but you might find that the expenses value is significantly lower.
Self-assessment for freelancers, sole traders and the self-employed
If you’re self-employed or you’re a freelancer or a sole trader, you’ll be required to pay taxes through self-assessment.
If you haven’t paid tax before, and you’ve recently become self-employed, the first thing to do is register with HMRC online.
They will send you a unique tax reference, which will enable you to file your tax return online and access the self-assessment portal.
Eligible for self-assessment ?
If you’re eligible for self-assessment, you’ll need to pay tax either via a single payment or two separate instalments, depending on the amount of tax you owe.
Preparing a tax return involves providing details of your income and your taxable expenses.
Self-assessment for the employed
If you’re self-employed, but you also undertake work for an employer, you’ll need to disclose details of your employment in the relevant section of your tax return.
You will be asked to provide information about your employer, including their name, their address and their PAYE reference number.
Your income from employment will be taken into account when calculating your annual tax bill.
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