Sophie Clarke
Who can claim working from home expenses?
If you run a small business from home, or you are employed but work from home regularly, you may be able to claim tax relief on some of your household costs. The rules depend on whether you are self-employed or an employee, and whether working from home is a requirement or a choice. For self-employed sole traders and partners, you can claim a proportion of your home running costs as a business expense. For employees and limited company directors, the picture is slightly different: you can claim tax relief on expenses not reimbursed by your employer, but only if you are required to work from home. Many small business owners miss out because they assume it is not worth the paperwork. It often is.
The simplified expenses method for self-employed
HMRC offers a simplified way to claim working from home expenses if you are self-employed. Instead of working out the exact proportion of your bills, you can use a flat monthly rate based on the number of hours you work from home. For the current tax year, the rates are:
- 25 to 50 hours per month: £10 per month
- 51 to 100 hours per month: £18 per month
- 101 hours or more per month: £26 per month
These rates cover your additional household costs such as heating, electricity and broadband. You do not need to keep receipts for the individual bills, but you must keep a record of your working hours to justify the claim. The simplified method is popular because it is straightforward, but it may not give you the best result if your household bills are high. In that case, claiming a proportion of actual costs could be more beneficial.
Claiming a proportion of your household bills
If you choose the actual costs method, you can claim a reasonable proportion of your household bills as a business expense. Typical costs include gas, electricity, water, broadband, council tax, rent and mortgage interest. You cannot claim mortgage capital repayments. The proportion you claim should reflect how much you use your home for business. A common approach is to use the number of rooms you use exclusively for work divided by the total number of rooms in your home. For example, if you have a dedicated office in a five-room house, you might claim 20% of your bills. But if you work from the kitchen table, a time-based proportion might be more appropriate. You need to be able to justify your method to HMRC if asked.
What you can and cannot claim
It is important to know the boundaries. You can claim for additional costs you incur because you work from home, such as extra heating, electricity and business phone calls. You cannot claim for costs that are purely personal, such as your normal household bills that you would pay anyway. You also cannot claim mortgage capital repayments or rent for the part of your home you do not use for business. One common concern is capital gains tax. If you claim a proportion of your home as a business expense and later sell your home, you might lose some of your private residence relief. This is a complex area, so it is worth speaking to an accountant if you have a dedicated office. For most small business owners who work from home occasionally, the simplified expenses method avoids this issue entirely.
Employees and directors: the homeworking allowance
If you are employed or you are a director of your own limited company, you can claim a tax-free homeworking allowance of £6 per week, or £26 per month, if you are required to work from home. Your employer can pay you this amount, and it is not taxable or subject to National Insurance. If your employer does not pay it, you can claim tax relief on the same amount through your tax return. However, if you choose to work from home rather than being required to, you generally cannot claim this allowance. Some employers pay more than £6 per week, but any excess would need to be justified with evidence of actual additional costs.
Practical tips for making a claim
To make a successful claim, keep good records. If you use simplified expenses, note down your monthly working hours. If you claim actual costs, keep bills and receipts, and write down how you calculated your business proportion. Choose one method and stick with it for the tax year. Review your claim annually, as your circumstances may change. If you are unsure, a good accountant can help you maximise your claim while staying within HMRC rules. Many small business owners find that a quick review of their home working costs uncovers a worthwhile saving.
