A home office is simply using a portion of your own home to carry out work related to your business. This can be as straightforward as paying bills from a desk in your lounge, to using part of your home as an Air Bnb, right through to kitting out your garage as a fully working test kitchen.
If you can show that there is part of your house that is used primarily for your business, then you can claim some of your personal expenses as business expenses.
First things first: you need to figure out exactly how much of your home is used for business. If you pay your business bills from your kitchen table then this unfortunately doesn’t count. But, if you have a desk in the corner of your kitchen to pay your bills from, then this does!
You’ll need to know the area of your house, and then work out the area that is used for your business.
Here’s an example where parts of a house and garage are used for business. The garage is used for storage for the business assets, and nothing else. The area is 36m2. The house has a small office room which the owners use for business purposes only. The area of this room is 9m2. The total area of the house and garage is 150m2. Now for the maths: the total parts used for the business is 9 + 36 = 45m2. Divided by the total area, 150m2 = 30%.
We can now apply this rate across expenses relating to the home. This includes:
Mortgage interest or rent
Insurance (both house and contents)
Rates (water and land)
Electricity and gas
Security and alarms costs
You can also include 50% of the cost of your home phone line.
There are other expenses which you can claim too. If you do any repairs or maintenance work on the areas which you use for business, these can become full business expenses. You can also include your personal mobile costs if you use your mobile phone for business. And expenses such as light bulbs, toilet paper & soap – you can claim these at the same rate. So it really can pay to keep a record of all your costs, because it will save you tax.
If you're a Beany client, then don't worry, we do all this for you at the end of the year!