10 Tax Advantages of Home Working: James Bond Style

Secret agentImagine you’re James Bond…

You’ve dispatched the Bad Guys, and now you’re setting up shop on a tropical island, offering spy services. Judi Dench has promised you some referrals, you’ve got a brand new office in a corner of your grass hut, and of course, you’re a sole trader. No limited kind of company for you!

And being the smooth operator you are, you want to know if you can claim some of your working from home costs, as HMRC reaches even to tropical paradises.

So settle down, sip your coconut, and read on.

1.  Gas & electricity

You can claim a proportion of the cost of gas & electricity back from your tax bill (it’s called being tax-deductible or an allowable expense). You burn palm tree leaves instead, but the principle is the same. There is even an official formula HMRC require to work out the right proportion of business to personal expenditure. It’s based on the size of your grass hut, whether you have a designated office, and how many hours from home you work. For example, hours spent chasing villains is not working from home, so you couldn’t claim for those. Email me for the formula or have a look on HMRC’s website.

2.  Water

Water needs collecting by your Bond girl, so it’s like being on a water meter. That means you can claim a proportion of your water costs off your tax bill according to your business/personal calculation. If you’d built your grass hut right next to the stream so the amount you used made no difference, that’d be like water rates. Bills based on water rates can’t have a proportion claimed back as the amount you use makes no difference to the amount charged.

3. Rent/council tax

Council tax? Rent? You escape all of that on your tropical island. It’s just as well, as it’s not tax- deductible anyway. There are circumstances where you can deduct a proportion, but that means it can get complicated (and possibly a tax bill) if you sell your house/hut/flat/mansion.

4.  Landline phone

Haha! I bet you didn’t know the island monkeys run a telephone service! Enterprising lot they are. Unless you’ve organised a business contract, the cost isn’t an allowable expense as HMRC argue that you have the phone for personal reasons. You can claim the cost of business calls though. It can be easier to use a service like Skype or a mobile for all outgoing business calls, so it’s all tax- deductible. Adding up all those calls on a landline bill can take up valuable spying time!

5.  Internet

Ah, the glories of the internet, making possible a spy service from a tropical paradise. It’s the really tricky one though, for working out if it’s an allowable expense. Do you deliver paid-for client services through the internet, e.g. streaming? If so, you can argue that the full cost of your internet is business because you need it to deliver your service. I say argue, as a tax inspector may disagree. For most of us, the internet is used for marketing (websites, social media) and communications, and so ‘ not as important’ in HMRC’s view. They’d argue that – like with the landline – you have it for personal reasons first and there is no extra cost because it is also used for business. This may change in the future as there are few businesses that can operate without a website in reality. One option is to have a business internet contract or use mobile wi-fi for business.

6.  Contents insurance

Spy kit is expensive! Going for a separate insurance policy for your business assets is a good idea if you have more than just a laptop. Policy Bee are a micro business who do this (not an affiliate link, I just think they’re ace). That’s tax-deductible.

7.  Commuting costs

You don’t have any! Woohoo! The costs don’t come off your tax bill, so that’s a lot of expensive helicopter flights saved.

8.  Office furniture and equipment

These are usually capital items (assets: anything that will last more than a few years) and not expenses. They need to go in a different place on your tax return, but if allowable, they are tax-deductible as long as you don’t go over the annual limit. The limit changes so check every year. The cost of your palm tree desk and chair and your firefly lamp are allowed capital items, a new carpet isn’t.

9.  Repairs

You’re allowed the cost of repairs: for example, a new desk leg when the termites get in or the monkeys crash through the wall. You won’t be allowed the cost to repair the actual wall, as that’s considered part of your home.

10.  Cake

Yes, they even have cake on tropical islands. It wouldn’t be paradise otherwise would it? Tuxedo cake is especially suitable for stylish spying. Unfortunately it’s not tax deductible, as it’s food/ entertainment. Don’t let that stop you though.

(crackle over the radio) “What’s that you say?”

“You’d like to arrange a video call to discuss my services? Of course. When are you available? I’m just chasing up Judi who hasn’t sent her tax paperwork in, and then I’ll be right with you. Coconut brownie while you’re waiting?”

Note – this post relates to sole traders working from home. The situation is different for employees and directors. There is also a flat rate you can claim, whatever your situation, which is a lot simpler than keeping all the records and doing the calculations. Email me for details or have a look on HMRC’s website.

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Today’s Micro Action

Are you a sole trader? If so check your records and see if you need to change anything. And if you have any questions, please leave them in the comments.

Rosie Slosek

Rosie Slosek runs One Man Band Accounting, supporting one man bands in the UK with hassle and fear-free accounts mentoring, with a home made brownie for every client. Start your week well and sign up for her free Accountability email every Monday morning at 8am.

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Comments

  1. Didn’t know the one about landlines.
    When I was a lass and more people could afford a mortgage, if you used x% of your home as an office you could set x% of the mortgage against tax. (Or was it x% of the mortgage interest?) Can you claim anything if you rent a flat?

    • It’s tricky – one person in HMRC says one thing, someone else says another. If you have a business contract (which you may do if you have a garden office), it’s definitely ok. Otherwise, some of them say you can claim a proportion, some say none is ok. Given most of us working from home are wise to have a landline for personal reasons (emergency in case mobile is lost or networks go down), that would mean it wasn’t allowed. The business calls are, although most of my clients don’t claim them as the paperwork involved is so time intensive.

      You can claim X% of your mortgage interest and council tax if you use a separate area. However then you’re saying part of your home is business premises and it can get tricky, and invoke capital gains tax, when you sell your home.
      Rosie Slosek recently posted..10 Surprising Ways An Accountant Can Benefit Your Micro BusinessMy Profile

  2. No one has ever seen me and Bond in the same room…. Just sayin.

    Do sole traders not have an antertainment allowance at all? I seem to recall that a limited company is allowed to set a Christmas party against tax, and entertaining clients.

    • Sole traders have no employees, so they don’t receive an allowance for a limited amount of entertaining them.

      A limited company has a limit per employee per year, with restrictions. Unfortuately, even that doesn’t apply to director only parties (which was a topic of discussion between Emily Coltman of Freeagent and myself.). While I don’t want bands of big corporation directors going to Le Gavroche on my tax bill, it seems rather unfair to the one/two man band director only companies.
      Rosie Slosek recently posted..10 Surprising Ways An Accountant Can Benefit Your Micro BusinessMy Profile

  3. Really good article.

  4. Who said accounting is boring?

    Great post, Rosie!
    Henneke recently posted..The Stupidity of “Click Here”My Profile

    • I love putting complicated things into a fun understandable context, Henneke 🙂

      It was a great afternoon working for myself. Sipping a latte in my favourite coffee shop, imagining what James Bond would do, trying not to imagine Daniel Craig in swim wear, and applying it all to what would really help Hub readers understand more about the concepts.
      Rosie Slosek recently posted..3 Reasons Tax Returns Belong With CakeMy Profile

  5. Hi Rosie, I had no idea that reading about tax could be so much fun 🙂 What a great and informative post that helps to clarify a lot about the tax rules of working from home. Thanks so much for writing it 🙂
    Georgina El Morshdy recently posted..Will You Embrace This Opportunity For A Fresh Start?My Profile

  6. A really handy list, thanks Rosie…

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