Tax Insider Tip: Business Use Of Home: Fixed Deduction

To save the work involved in calculating the proportion of household expenses that are deductible where a home is also used for business purposes, from 6 April 2013 onwards a statutory deduction is available for business use of home. The statutory deduction can be used by sole traders and by partnerships where all the partners are individuals. It is not available to companies.

You can claim a fixed deduction each month in respect of business use of your home. The amount of the deduction depends on the number of hours spent at home during that month working wholly and exclusively on the business (including any hours worked by employees). The fixed monthly deductions are as shown in the table below.

No. of hours worked at home in month    Monthly deduction
                     25 to 50                                    £10
                     1 to 100                                    £18
                     101 or more                              £26

Example:
Nicola is self-employed as a beautician. She carries out treatments both at clients’ houses and at home. She also undertakes the business administration at home. Each month she spends 60 hours working at home. She claims a fixed rate deduction by reference to the set amount of £18 per month.

This equates to an annual deduction of £216.