Working from home can save you time on your commute and costs on office space. However, remote working comes with its own costs in the form of higher utility bills, broadband charges and office equipment. Fortunately, if you are a sole trader or limited company owner, you can claim money back on some of these expenses. 

In this guide:

  • When can I claim tax relief on home office expenses?
  • What expenses can small business owners claim when working from home?
  • What expenses can I claim as a sole trader?
  • How Countingup can help you organise your expenses

Keep reading to find out everything you need to know about claiming expenses when working from home. 

When can I claim tax relief on home office expenses?

HMRC offers a tax relief to help employees pay for the additional expenses incurred when working from home. According to the government website, you can claim tax relief “for additional household costs if you have to work at home on a regular basis, either for all or part of the week.” 

The amount you can claim depends on how much time you spend working from home and the costs you incur while doing it. Typical costs include:

  • Utility costs like gas and electricity
  • Insurance costs
  • Phone or broadband
  • Equipment like a laptop or tools

To claim back on these expenses, you must prove that these costs are business-related by including receipts, invoices, or bill statements, and the purpose for the expense when you submit your claim to HMRC. We’ll explain more about how to claim these expenses later in this guide. 

You can’t claim tax relief if you choose to work from home or if you only use your home as an office for an insignificant amount of time, that is not impacting your standard working practices. For example, if a contractor or designer completes most of their work on-site and only spends a few minutes each day doing admin work at home, that’s not enough to claim tax relief. 

The rules over what you can claim on expenses can seem complicated, especially since they’re different for limited companies and sole traders. We’ll break it down for you below to give you a better understanding. 

What expenses can I claim as a small business owner working from home?

If you run a limited company and have to work from home, then there are a few ways you can claim relief for your home office expenses:

HMRC basic allowance for home working

Owners of limited companies can claim HMRC’s published allowance (or flat rate) for the additional costs of running your business from home. You don’t need receipts to declare your expenses, and you can claim a maximum of £6 per week. 

While this may seem like a relatively tiny sum, if you claim it every month, it adds up to £312 per year –– money that would ordinarily be subject to taxes like the Corporation Tax if extracted any other way.

Claiming costs of electricity, heating and telephone

If you have to spend all or most of your operating time working from home, you can claim tax relief on some other expenses like business-related utility bills. Bear in mind that you can only claim these costs as long as you don’t need them for personal use. For example, a business-only landline, or electricity bill for keeping the lights on in your studio when you’re working.

To establish the proportion of household costs your company uses, you need to calculate the total number of rooms and utility bills allocated to business purposes. You can find out more about how to calculate the flat rate on tax relief from working from home here.

HMRC has a dedicated community where you can ask questions about calculating your tax relief for working from home. 

Can I claim relief from rent and mortgage?

Company directors can’t claim back any proportion of rent, mortgage interest, or council tax from their companies. The reason for this is that you would have paid these expenses anyway, meaning they don’t count as business expenses, as HMRC states here.

However, as a limited company owner, you could ‘rent out’ your property to the company as a portion of the rent or mortgage interest paid by your household. Remember, you must disclose this rental income on your annual self-assessment tax return, as this will impact your personal earnings and tax position for the year.

Under the Companies Act 2006, you also need to create a formal contract to cover the rental agreement. 

What expenses can I claim when working from home as a sole trader?

As a sole trader, you can claim a portion of almost all your expenses against your tax bill. Although, like limited company owners, you still have to prove that these costs were genuinely incurred while running your business. 

You can choose to claim simplified expenses for the self-employed, where you use flat rates (HMRC’s standard expense allowance) instead of working out your actual business costs.

The monthly flat rate in relation to hours of business use for claiming simplified expenses is as follows:

  • 25 to 50 hours – £10
  • 51 to 100 hours – £18
  • 101+ hours – £26

If you prefer, you can work out your exact costs by calculating the precise balance of personal vs business use. The government has a simplified expenses checker that helps you decide which method is best for you.

What expenses can I claim as a sole trader?

  • Council tax
  • Mortgage interest
  • Rent (only if you rent your home from a landlord)
  • General household repairs and maintenance
  • Water rates (only if you can prove you need the extra water)
  • Business telephone calls
  • A proportion of your broadband

Find out more about the expenses you can claim in Countingup’s downloadable guide.

Organise your business expenses with Countingup

Accounting software like Countingup allows you to keep track of your business expenses by automatically categorising them in the app. You’ll also receive real-time insights on losses, profits, cash flow, invoicing, and more.

It automates the tedious process of bookkeeping and tax planning so you can focus on running your business. 

Sign up for a Countingup business current account

Find out more about the Countingup business current account and free built-in accounting software here. Download the Countingup app from AppStore or GooglePlay today and sign up for free.