As a freelancer, it can be difficult to know what you can claim as a business expense and what is considered a private cost. When it comes to working from home, this can be especially tricky and hard to navigate.
After all, if you are like many other freelancers, your home is also your office or primary place of work, so does that mean you can claim rent on your taxes? If so, how do you go about doing so?
Understanding what is ‘reasonable.’
If you use your home as your office, then you can claim a deduction on your annual taxes. However, the claim must be reasonable. If you use one room as an office out of your four-roomed home, then you can claim a 25% home cost. The more rooms in your home, the lower the percentage you can claim – it must always be altered accordingly.
What home costs can freelancers claim at year end?
In your home, you can claim a proportion of the expenses for the office use. These include:
- Council tax
- Home or renter’s insurance
- Household bills (including gas, electricity, water)
- Mortgage interest or rent costs
- Cleaning bills and household repairs
- Internet, phone and other communications costs
- Computer items and stationery
Remember, your home costs must be reasonable. So, if you do use your home as your place of work for a full working week, then you are right to claim a percentage appropriate to the room in your house. If you only use your home as your office for a proportion of the time, then you must only claim what is reasonable for your use.
Anything more than what is reasonable is sure to draw the attention of the audit team, so make sure that you are honest and use common sense when calculating this amount.
Remember to keep a record of your bills, receipts and expenses so you can prove your reasonable costs and your right to claim them should HMRC decide to review your tax case. Records are an essential part of your claim, so make sure you keep a note of everything ready for your self-assessment.
If you are unsure what you can claim for, it is wise to speak to a qualified accountant who can help you to get your tax affairs in order.
Are you worried that all of this might get a bit complicated or hard to keep track of? Cloud based accounting software is the best way to navigate this hurdle. Pandle lets you simply add all of these costs into our easy to use software, and we take it from there.
You can even store your records right on our site for access any time, anywhere. Easy, elegant solutions for freelancers – that’s what we do best.
Learn more about our online bookkeeping software for freelancers.