For the purpose of this blog let’s assume you are self-employed and you work from home…can you claim back the cost of your utility bills?
Well yes you certainly can! But under one rule – you must be able to differentiate the percentage of use for business.
This can be tricky and doesn’t need to be exact down to the last millisecond of utility used each day, but you will need to ensure you calculate how long you work on the business in your home and then what percentage of each utility bill is applicable. Once you work this out you will need to keep a note of it somewhere as to how you calculated this percentage – this is purely to cover your own back should the HMRC ask why you claimed this amount.
So firstly, how do you go about working this out for each utility bill? Well some things can be simple, for example do you have a second phone line which is purely your business telephone? Yes? Well then that is 100% for business use, therefore you can claim 100% back of the cost of that monthly bill in your tax return.
But let’s take something a little more complex…the electricity bill for example.
To make this easier let’s just say you are a web designer, you work from home and you work 9am to 5pm Monday to Friday.
You will constantly use electricity for the purpose of your business during these times, thus we need to work out what percentage this equates to of your monthly bill – this can be done in 3 easy steps:
1 – Work out how many hours you use each month
You will be using 8 hours worth of electricity everyday (9am to 5pm), you work 5 days a week (40 hours of electricity), 20 days a month (160 hours of electricity)
2 – Work out the hours in a month
Let’s just average it out and say there are 30 days per month which is 720 hours
3 – Divide your daily hours by the hours in a month and times by 100
Simply divide your 160 hours by the month’s 720 hours and times that by 100 to get your percentage of use for business, which equals 22%
Simple as that! You can now officially claim back 22% of every electricity bill each month on your tax return, just from doing a quick bit of maths!
I hope that helps and if you want anymore information just contact me at email@example.com
Feel free to check out my Google+ Page