How Much Can I Claim for Using My Home for Business?

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It depends on how you choose to calculate it. You can either claim a flat rate of up to £26 a month (if you work from home for 101 hours or more per month) using HMRC’s “simplified expenses”, or you can calculate the actual proportion of your household bills that are used for business.

If you run a small business or work as a sole trader in the UK, using your home as an office means you are legally entitled to claim back some of your household running costs. Here is a simple breakdown of how both methods work so you can choose the best one for you.

Method 1: The Easy Way (Simplified Expenses)

If you don’t want the hassle of working out exactly how much electricity your laptop uses, HMRC offers a flat-rate method based entirely on the hours you spend working from home each month.

Here are the current monthly flat rates:

• 25 to 50 hours a month: £10 per month
• 51 to 100 hours a month: £18 per month
• 101 or more hours a month: £26 per month

Note: This flat rate only covers things like heat, light, and power. You can still calculate and claim the business proportion of your telephone and broadband bills on top of this.

Method 2: The Accurate Way (Calculating Actual Costs)

If you have high household bills, or if you use a significant portion of your home exclusively for work, the flat rate might leave you short-changed. Instead, you can claim a proportion of your actual expenses.

To do this, you must split your household expenses between personal use and business use on a “fair and reasonable basis.” You can apportion these costs using three main methods:

1. By Area (Rooms): If you have a five-room house and use one room exclusively as your office, you can generally claim 20% (one-fifth) of your fixed home costs.
2. By Time: What if you use the spare bedroom as an office from 9 am to 5 pm, but it’s used as a family room in the evenings? You take the 20% room calculation from above, and then reduce it further based on the hours it is actually used for business versus personal time.
3. By Usage: This applies to metered utilities like water or electricity, where you estimate the actual business consumption.

What costs can you split?

• Fixed Costs: Things like your rent, mortgage interest (but not capital repayments), council tax, and home insurance. These are usually divided by the number of rooms or floor space.
• Running Costs: Things like heating, electricity, cleaning, and internet. These are usually divided based on the time you spend working and the area you use.

Claiming Your Expenses

You will declare these expenses when it is time to file your tax return to HMRC. If you are just starting out, you might be wondering, Can I Do a Self-Assessment Tax Return Myself? The answer is absolutely yes! HMRC’s online portal is designed to let you file your own return, provided you keep good records of your income and your home-office expenses.

However, calculating complex apportionments—especially if your home usage fluctuates—can get tricky. Many business owners eventually hand this over to a professional. If you decide to go down that route, you’ll be happy to know that the answer to Are Accountant Fees Tax Deductible? is a resounding yes for your business accounts.

Just a quick tip if you do hire a professional to help calculate your home expenses: anti-money laundering laws require them to verify who you are before they start working on your tax return. If you’ve ever wondered Do Accountants Need Your Passport?, having your ID ready will speed up the process immensely.

Summary If you work from home a few hours a week, the simplified flat rate is the easiest route. But if you have a dedicated home office and high bills, taking the time to calculate your actual apportioned costs will likely save you much more on your tax bill!

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