Glad you enjoyed the episode!
That’s great advice. As a self employed person in the UK, we can actually deduct certain taxes from working from home (although there are a few rules).
To make the UK calculation, you first define the room you work in and what percentage of time that room is used for working. If a room is used 100% for work you need to pay business rates so the smart option is to split the room purpose. For example, I have an office/entertainment room which consists of my office but also a couch & television.
I factor that I use the room 80% for work and 20% for leisure. Once you have that calculated, you then work out the overall area of the room for your house - this can either be ‘advanced’ in the sense that you work out the square footage of each room or alternatively it can be more simple by just counting the rooms as single entities. I personally just count the rooms.
My house has has 6 rooms. Under UK law I can claim back any house expense which factors into my business (except for telephone or internet unless they are solely for the purpose of the business). So, as an example most home based businesses can claim electric & private rent (not a mortgage).
To find the expense figure (in the UK) you just run the original expense through the formula of:
a = (100 / no of rooms)
b = business use percentage / 100
c = (expense / a) * b
a works out the room ratio/percentage based on amount of rooms in the property
b works out the percentage in decimals for the room use
c works out what you can claim back.
So, say I have 6 rooms, 1 is used for 80% business and I have a £1000 rent, the formula is:
100 / 6 = 16.66666% (round to 16%)
80 / 100 = 0.8
(£1000 / 16) * 0.8 = £133
So, of that £1000 rent bill I can claim back £133 per month. That may not seem like a lot in that scenario but it soon adds up (especially when you consider you will have to pay rent regardless if you worked from home or not). So over the course of a year you would be able to claim back just over £1,500 in expenses for your rent.
I’ve found, when working from home and especially when online, calculating expenses and claiming them back is HUGELY important. This is because it’s so easy with marketplaces like Fiverr to think “Well, all I do is log on and deliver work which only takes my time and skill - I don’t need to pay to offer my services so I have no expenses”. In that scenario, you can often be stung because an at-home business has few expenses which are the same as a storefront and many people fall into the thinking that they don’t have many expenses. So, when tax time comes, they pay an inflated amount compared to if they did indeed have a store front.