Self Employed - Claiming tax relief on the use of your home

There are two things to consider for tax purposes if you are using part of your home for your business e.g. as an office, as consulting rooms, for storage etc

Claim Business Expenses

You can claim, as an expense, the cost of using that part of your home for the business.

To do this you need to first calculate the total cost of running your home. Take into consideration all running costs such as:

Heat and Light being gas and electricity
Council Tax
Insurance
Rent or mortgage interest
Water if you can show some business use for water apart from tea and coffee

Then work out what proportion of your house you are using for the business.

The factors to be taken into account when calculating this proportion are:

Area: what proportion in terms of area of the home is used for business purposes?
Usage: how much is consumed? This is appropriate where there is a metered or measurable supply such as electricity, gas or water.
Time: how long is it used for business purposes, as compared to any other use?

As an example if the house has a eight rooms including an office which you use for the business then it would be reasonable to say that 10% of the house was used for business, taking into account that the office would not be used all the time.

So if you calculated your total annual running costs to be Ł3000 then you can claim Ł300 a year as a business expense through your accounts.

Capital Gains

The golden rule here is to not use the room exclusively for your business and make sure that it is also used for some other purposes as well. For example as a TV room, to store personal papers, a computer games room etc.

If you do this then all of your house will still be considered as your only or main residence (OMR).

This means that if you sell your house, there will be no capital gains tax (CGT) to pay, as your only or main residence is exempt from CGT. The fact that you use the room mainly but not wholly for business doesn't affect the exemption.