Working from home tax relief & Business Banking


#1

So sorry about this, but could I double-check that my understanding of this is correct with you?

Until now, I have used my personal bank account since my business phone and everything else was set up for my personal account and I could not see the benefit of opening another despite being an FSB member and getting advantageous terms with the Co-Op.

I now realise it might not have been the best idea and have just applied for the FSB bank account.

Question: as I work from home, I am able to claim some tax relief of my energy, water and even council tax bills (I never understood the latter). But all these need to come out of my personal account as they are not business expenses. My understanding is that HMRC is not bothered so long as you can prove that you did indeed pay these from a bank account you own. As far as I understand it, the only concern would be for an accountant (if one has one) as they then need to check both sets of bank statements so it may increase what you pay with them.

Is that correct?

Sorry for this.

Anna


#2

Hi Anna

Bookkeeping not my forte, but my understanding is that you are allowed to claim a percentage of the home office costs as a business expense. My bookkeeper does this on the accounts programme by having a separate “dummy” bank account which she records how much we claim for that in. The rationale we use to work it out is overall square footage of the house and the percentage of my office (which is a cupboard so it’s tiny!!!). Other people might say that it’s 10% of their overall bills or £100/month as a flat fee.

It’ll vary depending on loads of other stuff and it can impact on capital gains I think if you own the house… My advice would be to speak to an accountant, because it’s going to vary hugely depending on your own personal circumstances.


#3

I feared that would be the answer. Thank you very much @caroline


#4

Dear Anna,

As long as you claim a fair and reasonable proportion of the bills, HMRC will not be concerned about which bank account you use to pay the bills.

Sometimes, the bills are on the name of a family member, a housemate or landlord, and pay from his/her bank account. In this case, HMRC can accept that a proportion of the bills are claimed as part of your business expenses, irrespectively of how you pay back part of the bills to the household member.

If you trade as a self-employed, the taxman is a bit generous and can accept that a proportion of the household bills are claimed for business purposes.

However, trading as a limited company, the business expenses proportion is restricted by the taxman or cannot be claimed at all. There are other rules for this.

I hope the above can help.

Regards,

Carlos Cedeno-Velez


#5

Ah - knew there would be someone with the answer! Yes, the bookkeeping is not my friend… :smile:


#6

All assuming you are a sole trader

You can either work out the proportion of your home bills which are for business use, or you can use Simplified Expenses.

Your bookkeeper would normally do a journal entry to take this out of any drawings and add to the relevant code in your accounts.

The current HMRC guidelines are:

  • Calculate your allowable expenses using a flat rate based on the hours you work from home each month.

  • This means you don’t have to work out the proportion of personal and business use for your home, eg how much of your utility bills are for business.

  • The flat rate doesn’t include telephone or internet expenses. You can claim the business proportion of these bills by working out the actual costs.

  • You can only use simplified expenses if you work for 25 hours or more a month from home.

  • |Hours of business use per month|Flat rate per month|

  • | — | — |

  • |25 to 50|£10|

  • |51 to 100|£18|

  • |101 and more|£26|

Regarding banking - you don’t need a business account however it is preferable to have a separate account.


#7

Thank you so much @carlos

Really useful!


#8

Thank you @admin2day this too is very useful :slight_smile: