If a taxpayer is self-employed and running a business from home, there are simplified expense rules available for claiming a fixed rate deduction for certain expenses where there is a mix of business and private use. The simplified expenses rules are not available to limited companies or business partnerships involving a limited company.
The use of the flat rate expenses for core business activities carried out from the home eliminates the need to calculate the proportion of personal and business use for certain bills in the home; usually, this applies to various utility bills. Instead, a monthly deduction is allowable. The use of the simplified expenses regime is optional, and businesses can claim the trade proportion of actual costs.
The current monthly rates are based on the business use of the home as follows:
- 25 or more hours worked per month can claim £10.00
- 51 or more hours worked per month can claim £18.00
- 101 or more hours worked per month can claim £26.00
There is no issue if the number of hours worked varies from month to month as different amounts can be claimed for each month. The minimum number of hours worked in any month must be 25 or more. The flat rate doesn’t include telephone or internet expenses and the business proportion of these bills can be claimed by working out the actual costs. In addition, use of the flat rate deduction for household running costs does not prohibit a separate proportional deduction for fixed costs such as council tax, insurance and mortgage interest.