Business expense12/3/2023 Working from home, including rent, utility bills, council tax, and other similar costs (not including phone and internet).You can only use simplified expenses to calculate the costs of: Simplified expenses use a flat rate to calculate the allowance for mixed personal and business expenses. If you’re a sole trader or in a partnership and working from home at least 25 hours a week, you can use simplified expenses rather than having to work out the actual cost. Rather than doing complex calculations each year, you might be able to use simplified expenses to claim business-related costs while working from home. If your electricity bill is £300 a year and you have three rooms in your flat, one of which you use exclusively as an office, you can claim £100 a year in electricity as a business expense (£300 divided by 3). If your home broadband costs £25 a month and you calculate that you use it for business purposes 40% of the time, you can claim £10 a month (40% of £25) as a business expense. Household repairs (except those that only relate to a part of the house you don’t use for the business).Utility bills including electricity and heating. So, how do you calculate business expenses in that case? You’ll need to work out what proportion of these services you use for business purposes.įreelancers working from home can claim a proportion of the following costs, in addition to any purely business-related expenses: If you’re a self-employed freelancer working from home, you use your house and services, such as the internet, for both personal and professional reasons. Working From Home – What Counts as a Business Expense? While there are a lot of items you can claim as allowable business expenses, there are also several you can’t. Training courses that directly relate to what your business does (if you’re retraining in a different field, you can’t claim the course as a business expense).Annual subscriptions to trade or professional journals.Member fees of any professional organisation you must register with (as recognised by HMRC).Bank fees or credit card charges (for accounts in the business’ name).online, in a newspaper or in a business directory Business website domain and setting up a business email address.The cost of buying a bicycle and maintenance costs.Accommodation for business-related travel.Computer software (if you use it for less than two years or regularly renew its subscription).We’ve set out the different categories of allowable business expenses below, along with some examples of each. When it comes to tax time, you can only claim “allowable” expenses which are reasonable, not excessive, and relevant to your business. With that in mind, let’s take a closer look at what counts as a business expense, before then going through some examples of things that don’t count as business expenses. Be sure to check out our article all about paying taxes as a sole trader if you’re thinking about becoming self-employed on the solo scale. While you don’t end up with more money in your pocket come tax time, you have made use of more of your money than you would if you didn’t have any business expenses. HMRC will then calculate your tax on £32,000 (revenue minus expenses), rather than £35,000. Let’s say your annual revenue is £35,000 and you calculate your allowable business expenses to be £3,000. As self-employed freelancers, it’s important to understand business expenses as they’re tax-deductible and reduce your overall tax liability.
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