SMALL BUSINESS RESOURCES

Claiming work from home expenses

4 min read

Claiming home office expenses (or ‘working from home’ expenses) is a vital component of reducing your business’s taxable income. These home office deductions will help you pay less tax to the HMRC.

If you’re running a small business from home, or are self-employed and use your home as an office, there are a number of home office expenses you can claim when processing your Self-Assessment  tax return.

Let’s do a run down on how much can you claim for a home office and look at common tax- deductible expenses and other key considerations.

What can I claim for working from home?

What you can claim for working from home is dependent on whether you’re an employee of a company or if you run your own business from home.

For the purposes of this article, we’ll be concentrating on self-employed individuals in the UK who use their home as an office or run a small business from their home in any manner or capacity.

Self-employed working from home

For the self-employed, you’re generally able to claim deductions for anything you use that is integral to the running of your business. 

If you use furniture, equipment, electricity, internet, phone, space (denoting rent or mortgage costs) you can generally claim these expenses as a tax deduction on your Self-Assessment tax return.

If you use a service or asset partly for business and partly for personal use, you’ll have to parse out the percentage usage for these expenses and only claim for the business portion.

Employee working from home

If you’re an employee working from home, please refer to the UK government advice here.

Tax deduction for home office

Claiming tax deductions for your home office can be a fiddly affair, especially if you only work in part from home or have a lot of mixed-use expenses that will need to be dissected.

It’s a wise move to enlist an accountant or bookkeeper at this juncture. They excel at finding expenses you may have overlooked. Business and tax advisors can also pinpoint areas where you could find yourself making ineligible claims with the HMRC.

For those who are self-employed, let’s do a brief overview of what constitutes eligible home office expenses in the eyes of the UK government.

Equipment

You may claim any equipment you use in course of running your business as a deduction. This includes:

  • computers
  • devices
  • printers and printing costs
  • office furniture
  • machinery
  • stationary
  • software

Lighting, heating, phone, and internet bills

You may also claim for services and rates which are used while running your home-based business. Such deductions include the business-use portion of your:

  • rent or mortgage costs
  • electricity
  • heating
  • phone bills
  • internet bills

How to calculate home office use for taxes

You can choose from two methods when calculating home office use for tax purposes.

  1. Simplified business expenses: You can choose to calculate your home office use using a flat rate scheme known as ‘simplified business expenses’. By using the HMRC’s calculator, you can simply apply the applicable flat rate for things like electricity. This calculation is achieved by looking at how many hours per week you work from home and applying a standard rate. 
  2. Actual costs: When using the actual costs method, you’ll have to dissect each expense, remove the personal-use portion, and then claim for the remainder as a business expense. This method is more involved, time consuming and complex. But you’ll often gain more in terms of deductions. If you have a bit more patience, high levels of expense and truly want to maximise your deductions, the actual cost method should be considered.

How to claim tax deductions for home office

Claiming deductions can be achieved by filing a Self Assessment tax return. When self-employed in the UK, you’ll be required by the HMRC to submit a yearly tax return which contains provisions for work from home expenses.

You’ll need to retain accurate records, such as receipts or logbooks, for each expense you wish to claim a deduction for. While the tax return itself doesn’t ask for such evidence per se, if the HMRC wishes to take a closer look at your expenses, you most certainly need to be able to present your records and receipts.

This concludes our brief guide to claiming working from home expenses for your home office when self-employed in the UK. If you require more information on EOFY tasks and duties, see our small business EOFY checklist here.