Home office expenses: a tax deduction guide for UK business owners

Perhaps you’ve turned a spare bedroom into an office. Or, you could be storing stock in a shed you’ve got out the back. If you’re doing either of these, it’s likely that some of your household costs are overlapping with operational business costs.​

Tax relief is available if you use your home for business purposes, but the way you claim is different depending on whether you’re operating through a limited company or as a sole trader. ​

If you run your limited company from home, you may be able to claim a tax deduction for some of the associated costs. There are three main ways to do this:​

The simplest option is for you as the company director (not the company itself) to claim HMRC’s fixed allowance for home working, currently £6 per week (£312 per year). This method does not require receipts or calculations and is a hassle-free way to cover basic additional costs, such as heating and electricity. The company director would claim this from the company, and the company can recognise this cost as a tax deduction.​

Your company can reimburse you for additional household costs incurred solely due to working from home. However, you cannot claim for fixed costs such as rent, mortgage payments, or council tax, only the extra costs directly linked to income-generating business activities.​

Allowable expenses might include:​

To claim this, you must keep records of your expenses and show they are directly attributable to your business. If no extra costs arise from working at home, you cannot claim anything under this method.​

Your company can pay you rent for using part of your home as an office, which allows the company to claim a tax deduction. However, there are key considerations:​

Each option has pros and cons, and the best approach depends on your specific circumstances. If in doubt, seek professional guidance to ensure compliance with HMRC rules.​

If you’re a sole trader operating your business from home, you can claim a portion of your costs, including rent, mortgage interest, and utility bills as a business cost.​

First, we need to understand the physical area of your home being dedicated to work.​ You need to calculate the total physical area in the house that’s dedicated to business. ​

Here’s an example:​​

If my electricity bill is £200 I would be able to claim the following as a tax deductible expense​

Alternatively, you could work out the proportion of the house used for business purposes on a square footage basis, rather than on the number of rooms. ​​

This calculation can be applied to:​​

Other, more specific expenses can also be claimed such as repairs and maintenance work on the areas designated for business.​​

It’s as simple as keeping a record of your home costs. Save your invoices and bank statements to your Google Drive or keep a spreadsheet and your Beany accountant will review them when it’s time to prepare your financial statements. From there, we’ll work out what can and can’t be claimed as part of the home office expenses.​

Beany are accountants for ambitious businesses. Delivering big firm expertise without the big cost, we take care of all annual work including financial statements and tax returns, along with day-to-day bookkeeping. And we love to work on more complex concerns such as strategic forecasting, financial insights, buying or selling a business and all things accounting related. With Beany, we help people make smarter decisions for their business and lifestyle through our responsive, friendly expertise. Book a call today to discuss how we can help your business.​