What expenses can I claim when working from home?
There are several expenses that you can claim when working from home. So long as these expenses are solely used for business purposes, you do not normally have to pay tax on them.
These are known as allowable expenses. However, allowable expenses are not automatic, and you could be entitled to some but not others, depending on your business structure. It is, therefore, your responsibility to check which allowable expenses you’re eligible for and claim them as part of your annual Self Assessment tax return.
In this blog, we cover the key expenses you might be able to claim when working from home. We also explain who qualifies for them and how much you might be able to claim.
1. Mortgage/rent
You can claim a portion of your rent or mortgage interest when working from home. This is because your home classifies as your business premises if you don’t have a commercial office or external permanent workplace.
To find out how much you can claim, you’ll need to calculate how many rooms you use for work in your home. Note that room(s) must be used exclusively for business purposes and do not include bathrooms, kitchens, or hallways.
For example, if you have a four-bedroom house and use one bedroom as an office, you can claim 25% of your annual mortgage interest (not capital repayments) or rental costs on your annual tax return.
Who can claim? Sole traders. Unfortunately, employees (including limited company directors) cannot claim mortgage and rent expenses, as this is considered a ‘fixed cost’. This essentially means that they incur this fee regardless of whether or not they work from home.
2. Utility bills
Your utility bills are likely to be substantial if you work from home most or all of the time. The good news is that the business portion of those bills qualifies as an allowable expense.
Similar to the mortgage/rent expense, you’ll need to work out how much you can claim based on the number of rooms you use for work. For instance, if your monthly heating and electricity bill comes to £150 and you use one out of four rooms for work, you can claim £37.50 a month in utilities (25% of £150).
3. Work equipment and stationery
If you need to purchase certain substantial equipment when working from home, like a laptop or computer, this is another allowable expense. Note that you can only claim the cost of qualifying work equipment if:
- You need it to do your job
- Use it primarily for business purposes
- There is no significant personal use
In addition, you can claim expenses for the following:
- Postage
- Stationery
- Printing
- Printer ink and cartridges
- Computer software for your business, if it has used it for less than two years
- Computer software, if your business makes regular payments to renew the license
Who can claim? Sole traders, limited companies, and employees (including limited company directors).
4. Broadband and phone bills
It’s unlikely that your business can operate without internet access. Whether it’s digital marketing, providing customer support, or simply carrying out your daily tasks, you probably need a good internet connection.
Likewise, you might have plenty of business phone calls to make (from either your mobile or landline), such as speaking to clients or staff. That’s why broadband and phone bills are considered an allowance expense when working from home.
Naturally, you can only claim the business portion of your monthly bills, but this is a little trickier to calculate. You either need individual business broadband and phone contracts, or if you only have residential ones, prove the split between business and personal usage.
Who can claim? Sole traders and employees (including limited company directors). Limited companies also qualify for this working-from-home expense, if the contracts are in the company’s name.
5. Council tax
Like property and utility bills, working from home makes council tax a necessary business expense, and is therefore tax-deductible. Similarly, you can only claim the business part of your council tax bill.
Who can claim? Sole traders.
6. Marketing and subscriptions
Certain marketing activities and relevant subscriptions are allowable expenses when you work from home. For example, you can claim the cost of:
- Advertising in newspapers or directories
- Bulk mail advertising
- Handing out free samples
- Website costs
- Subscription to trade/professional journals
- Trade body/professional organisation memberships related to your business
Depending on your industry, you may consider having lunch with a client as a form of advertising. However, HMRC considers this entertainment, so you can’t claim this expense in your tax return. However, most typical marketing activities (as highlighted above) are claimable.
Who can claim? Sole traders, limited companies, and employees (including limited company directors).
7. Legal and financial costs
Legal expenses are also tax-deductible if you work from home. For instance, if you hire an accountant or solicitor or incur any legal fees.
In addition, financial expenses, such as credit card charges, overdrafts, and business loan interest (not the repayments themselves), can all be taken off your tax bill. However, when it comes to interest and bank charges, note that you can only claim up to £500.
Who can claim? Sole traders and limited companies.
8. Business insurance
You can claim back the cost of any form of business insurance when you work from home. This includes public liability, employers’ liability, and contents insurance.
With some insurance types, such as contents, you will need to separate your personal content from your business content to deduct the cost from your annual tax bill.
Who can claim? Sole traders and limited companies.
9. Vehicle and travel expenses
If you work from home and have a business vehicle (or need to buy, lease, or hire one) or travel for work (e.g. to meet a client), you can claim many of the associated costs as allowable expenses. These include:
- Vehicle insurance
- Repairs and servicing
- Fuel
- Parking
- Hire charges
- Vehicle licence fees
- Breakdown cover
- Public transport fares
- Hotel rooms
- Meals and overnight business trips
The above only applies to work-related travel. So, a parking fine received on personal time or non-business driving does not qualify.
Alternatively, if you have a personal vehicle that you sometimes use for business purposes, you can claim tax relief on the following mileage rates:
| Vehicle | First 10,000 business miles in the tax year | Each business mile over 10,000 in the tax year |
| Cars and vans | 45p | 25p |
| Motorcycles | 24p | 24p |
| Bicycles | 20p | 20p |
Source: gov.uk
Who can claim? Sole traders, limited companies, and employees (including limited company directors).
10. Training courses
Last but not least, relevant training courses are classed as an allowable expense – even if you work from home. An approved training course includes one that improves your skills and knowledge to run your existing business, keep up to date with industry standards, or develop new skills to support your business.
In contrast, you cannot claim for courses that help you start a new business or expand into a business area that you don’t currently occupy.
Who can claim? Sole traders and limited companies.
Simplified expenses when working from home
All of the above costs involve keeping relevant records as proof of expenses. However, these can quickly build up and become difficult to manage.
If that’s the case, you may prefer to claim your working-from-home expenses at a flat rate. This is known as ‘simplified expenses.’ It means you don’t have to keep or provide receipts as proof, making it much easier to track and claim your allowable expenses.
If you work from home at least 25 hours a week, simplified expenses can be used to cover the business portion of your vehicle, utilities, and mortgage/rent. Here’s the breakdown of the flat rates applicable from April 2020:
| Hours of business use per month | Flat rate per month |
| 25 to 50 | £10 |
| 51-100 | £18 |
| 101 or more | £26 |
Source: gov.uk
It might not sound like much, but if you claim the maximum amount, that adds up to £312 a year, which you’d otherwise pay Corporation Tax and Income Tax on. Equally, this amount might not sufficiently cover your expenses, so you can claim the excess costs as explained in this blog.
Who can claim? Sole traders and partnerships (that have no companies as partners) qualify for the simplified expense rates. Limited companies are not eligible. However, employees (including limited company directors) can claim this as a reimbursement of expenses.
Summary
You don’t have to have a commercial office or external business space to qualify for tax relief on your work-related expenses. If you work from home, there are many common business costs that you can take off your Self-assessment tax return, depending on your business structure.
We hope you found this article helpful. Please get in touch with our team if you have any comments or queries in relation to this topic.
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Jo is Customer Service Operations Manager at Bizik, responsible for leading and supporting the team in delivering exceptional Customer Service, ensuring satisfaction and resolving issues efficiently. She has 10+ years of expertise and knowledge of the telephony industry and is passionate about developing strategies that improve service quality.
