Table of contents
Table of contents
If you’re self-employed with your own home office and you’re not claiming the expenses you’re entitled to, what are you doing?! This guide will tell you all you need to know about claiming working from home expenses, what you can claim for, and how to keep proper records (because ‘trust me bro’ isn’t enough evidence if HMRC decide to trigger an investigation).
It likely costs you money to keep your home running whilst you work – unless you do it with the lights off using just your mind (then fair play).
Because these costs add up, you may be able to claim a proportion of them against your tax bill if they relate to your business. You can claim for things like:
There are different ways you can calculate your work from home expenses, including:
It’s entirely up to you what method you choose – you just need to ensure you’re eligible for that method first. Otherwise, you’ll be unable to claim anything. Before you make your decision, let’s discuss each option in more detail.
If you use the flat-rate method it means you’ll be able to deduct a flat rate from your profits without having to calculate how much it costs to operate your business from home.
Whilst this may seem like the perfect option for those of you with a life and a fear of calculators, you could end up falling short if your business’s bills exceed what you’re entitled to.
It’s important to note while sole traders and partnerships can use simplified expenses – limited companies cannot.
But if you are a company director, you can use the flat rates to work out how much the company (as a separate legal entity) can reimburse you for using part of your home as a workspace. Then your limited company can claim said reimbursement as an expense. Seems sneaky but it’s legit, we promise.
The amount you can claim depends on how many hours you work from home – with a minimum amount of 25 hours per month.
Hours worked at home per month
25 - 50
51 - 100
101 or more
Amount HMRC allow you to claim
£10 per month
£18 per month
£26 per month
You don’t have to claim the same amount of expenses each month.
You worked 52 hours per month from home, for 10 months (£18 x 10 = £180), and 25 hours per month from home for 2 months (£10 x 2 = £20).
You can claim a total of £200 for that tax year against your household bills.
Calculating the actual cost of working from home could be better for you if:
The amount you can claim depends on how much you work from home. The types of expenses you claim for often include things like:
Step 1 – Count all the rooms in your home
So, any ‘normal living space’ will count as a room according to HMRC – excluding hallways and bathrooms even if you spend a lot of time in there hiding from your kids.
If you run a garden office for example, billed separately from the rest of your home, it’ll be classed as one single room in its own right. If it’s included in the bills, it’ll be an additional room to add to the total.
Step 2 – Record the rooms you work in and how long you work in them for
You need to figure out the percentage by looking at how many hours you spend in a room overall.
For instance, let’s say you’re in your living room for 10 hours a day. You spend 9 of those hours binge watching Friends, and 1 hour actually working (no judgement here). That means 10% of your living room time counts as work use.
Disclaimer for anyone with a dedicated office: It may be worth using that room for something else too – to avoid paying Capital Gains Tax when you sell your home.
Step 3 – For each bill you have, divide the cost between the number of rooms
The easiest way to calculate these costs is by identifying your bill and dividing them by each room you have. So, let’s say your electricity bill is £600 per year and you have 5 rooms. 600 ÷ 5 = £120. That means the cost per room is £120.
If you’re running a limited company you can’t claim for any ‘fixed costs’ unless you have a rental agreement between your home office and your company. Fixed costs include things like mortgage payments, home insurance, repairs, rent, and council tax. HMRC say you’d pay these costs whether you worked at home or not, so because your limited company is a separate legal entity to you, you’ll need an agreement between the two.
Step 4 – Apply the percentage of work use to the relevant rooms
Let’s say you use your living room to work from home, and your electricity bill divided by all 5 rooms is £120. We’ve already worked out you spend 10% of your time working in your living room. £120 x 10% = £12.
If you have a working office too, and you work in there 80% of the time, it’d be: £120 x 80% = £96.
This means you’d be entitled to claim tax relief on £108 of your electric bill.
Step 5 – Enter the total into your accounts
Apply the method throughout to your bills that are eligible and enter the total usage into your accounts. So, in this instance, for electric you’d ensure the total business usage of £108 has been recorded.
If you’re running a limited company then you’ve probably clocked onto the fact it’s much more straightforward for sole traders and partnerships to claim working from home expenses because they can claim fixed costs. It isn’t all doom and gloom though – you can in fact charge your limited company ‘rent’. Your company will then be able to claim this cost as an expense (and you’ll get reimbursed for your business costs).
You'll need to create an agreement between you as the individual and your limited company, showing what's included.
To create a rental agreement you’ll need to make sure you have a separate space dedicated to your business, charge rent at the commercial rate, and sign it on behalf of both parties.
Schedule an annual review to reassess the amount of rent you’re charging your limited company.
Even if those agreements or meetings are technically just you talking to yourself, they still matter because HMRC treats you and your company as two legally separate entities.
Think of it like those imaginary shower arguments you always win. It may feel one-sided, but it still counts.
It’s important to note there are other things to consider before renting a room to your limited company though! For example, the rent you earn will need to be declared as personal income. It might also mean that part of your home could be subject to Capital Gains Tax if you decide to sell it, so talk to an accountant to be sure this is the right way to go.
It’s super important you keep records of all your expenses, including those which relate to working from home. Whilst you don’t need to send any records of them to HMRC, they could ask to check them at any time. Using online bookkeeping software, like Pandle, can help you store all your records safely, so if HMRC do come knocking – you don’t need to run for the hills. Or hide in your washing basket.
Learn more about using Pandle to make business accounting easier. Create an account today and decide what to do with all the extra time you get back.
A creative content writer specialising across business, finance and software topics. I have a love for all things writing, and creating engaging, easy to understand content that helps everyday people!
Create your account today, and decide what to do with all the extra time you get back. We hear Pilates is popular.
Live chat support
No card details required
Making Tax Digital compliant
