What Expenses Can You Claim For Working From Home?

3 July 2024

If you’re a sole trader or operating via your own limited company and use your home as your main base for work, you can claim tax relief on some of the expenses.

With everyone feeling the pinch on household bills such as heating and electricity, it’s helpful to know what you can legitimately put through as a business expense.

The rules are different for sole traders and directors of limited companies.

Firstly, let’s look at rules for sole traders.

Sole Traders – Calculating the cost of working from home

Simplified Expenses

One of the most common and easiest way to claim reimbursement for your electricity and heating costs is the home working allowance.

This is a flat rate based on the hours you work from home each month and is available to you if you work for 25 hours or more a month at home. You don’t have to work out the proportion of personal and business use for your home (ie. dividing your heating bill by your number of rooms to work out what you can claim to heat your office).

home working allowances 2024

Alternatively, you can claim a portion of your household bills for one room of your home where you work. Bills can include rent, mortgage interest, council tax. To work out what you can claim, add up your bills and divide by the number of rooms in your house. For example, let’s say you have a household bill for £50 per month and there are 5 rooms in the house, you can claim £10. For expenses which relate to both business and personal use you will need to decide on the percentage of business use and claim only that value.

For costs such as heating and lighting, you will need to work out what proportion of your bill relates to business use. For example, you may have 10 rooms in your home and use one as your home office for 90% of the time. That means you can divide your heating bill by 10 and then claim tax relief on 90% of that figure.

Heating and lighting are not the only things you can claim tax relief for. Business expense rules can also be applied to:

  • If you own your home – a proportion of your mortgage interest and home insurance
  • If you rent your home – a proportion of your rent
  • A proportion of your Council Tax though business rates may apply depending on how much you use your home for business
  • Utilities such as electricity, heating, telephone and broadband. Water costs can be claimed if you use a significant amount of water for your work.

HMRC offers a simplified expenses checker to help you compare what you can claim with the two approaches.

Directors of Limited Companies

Business expenses are tax deductible, so they are discounted from any profit you declare at your year-end. This, in turn, reduces your Corporation Tax.

You can use the simplified method as outlined above, or you can calculate what portion of your household bills such as electricity and gas is attributable to your business by counting all the rooms in your home then identifying the rooms you work in, and for how long.

The average number of hours the room is available for is 728 hours per month. We have calculated this by taking the total number of hours per day (24), multiplied by the total number of days per week (7), multiplied by the number of weeks per year (52), and dividend by the number of months in a year (12). Then consider the total number of hours that you work in the room per month, divide this by the average monthly hours and multiply by 100 to reach your percentage use. E.g., if you work in your home office for 160 hours per month, then the percentage of use would be 22%. If you also worked in your living room 1 hour per day, 5 days per week (20 hours per month) the percentage of use would be 3%. For each bill, divide the cost by the number of rooms.

An alternative method would be to calculate costs by floor space for each room and divide the total cost by that percentage. As an example, if your bill is £500 and your office takes up 25% of your total floor space, the room cost for step four would be £125.

These approaches may sound rather complicated so it’s important to note that HMRC state the calculation simply needs to be a reasonable calculation.

It’s important to note that you cannot claim tax relief on fixed costs since these costs would be incurred whether the director worked at home or not. This means tax relief cannot be claimed on items such as mortgage payments, insurance, repairs and cleaning bills, rent and council tax. Broadband and telephone line rental costs can be claimed by calculating the percentage of costs based on the volume of business use. If you claim all or part of a line rental that’s in your name rather than the company’s, you could find extra tax is due.

Top tip – keep accurate records!

When claiming home working-related expenses, do keep accurate records. Utility bills, mortgage statements etc – any paperwork relating to the bills you are claiming tax relief on should have supporting documentation. At year-end, these documents will form part of your records to show HMRC that home working costs have been processed compliantly.

Find out more about claiming expenses when you run a limited company.

Here to help

Our team is here to support and guide you to work tax-efficiently and compliantly. If you have any questions relating to business expenses on your home working, please get in touch, we’ll be glad to help.

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