Use of Home as Office 2013/14 - including example

Self Assessment

Starting a business

Tax and Property

  As mentioned in the previous blog, the 2013/14 Revenue & Customs Brief has included a new set of optional rules designed to simplify various forms of expenses for sole traders and partnerships. The expenses claim that is being concentrated on in this blog is the expenses claimed when the office in the home is used as part of the business. The room in the house where work takes place must be wholly and exclusively used as an office or similar work environment.

 Previously, the method of calculating claims was by apportioning the actual expenditure of the house between the room where the office is based (for the business) and the remainder of the private home. This can still be used from the tax year 2013/14, but the new brief has designed an alternative flat rate for the running expenses so to simplify it for the small businesses. Fixed costs are not covered in the flat rate so must still be apportioned like the old method.

 The new flat rate suggests monthly amounts for the running costs of the office in the home based on the amount of hours worked from home in the month. These are:

Hours worked at home in the month	Flat rate per month
25 hours or more	£10
51 hours or more	£18
101 hours or more	£26

Example (relevant from 2013/14 tax year)

 James works 20 hours a week from his home office, and only uses this office for business purposes. His home office is one of 10 rooms in the house which he owns as opposed to rents.

-        His annual council tax is £2500, house insurance is £800 and mortgage interest is £6000 for the whole home.

-        Working 20 hours a week, his monthly flat rate for running costs falls in the £18 a month bracket, meaning £216 for the year for variable costs.

Home Office Expenses	£
Fixed Costs for house
Mortgage interest	6000
Council Tax	2500
Insurance	800
Total Fixed Costs	9300
Fixed Costs for Office (1/10)	930
Flat rate (for Office)	216
Total Expenses for Home Office	1146

The Fixed costs are apportioned to the office on the basis of the amount of rooms in the home. As there are 10 rooms in the property, 10% of the total fixed cost is given to the home office for the business. This method of apportioning is what would be used for running costs if the simplified expenses rules were ignored.