Working from home is no longer a rare phenomenon. It’s estimated that over 4 million self-employed individuals in the UK work from their own homes. Whether you’re a small business owner or a freelancer, using part of your home as an office can be a cost-effective and convenient solution for running your business. But did you know you can claim part of your home as a business expense and save money on your taxes?
This guide will walk you through everything you need to know about claiming part of your home as an office in the UK, including the criteria, the rules set by HMRC, and how to maximise your allowances.
Why Working from Home Is a Smart Move
For many entrepreneurs, having a home office isn’t just practical; it’s financially beneficial too. Here are some reasons why you may want to claim part of your home as an office:
- Save on Costs: Commuting expenses, renting a physical office space, and other overheads can add up. A home office eliminates these costs.
- Efficiency: With no travel time, you can dedicate more hours to work and maintain a better work-life balance.
- Tax Benefits: Claiming part of your home as an office can reduce your tax liability, helping you keep more of your hard-earned income.
The Financial Advantage of Claiming Your Home Office
The financial savings can be substantial. For example, depending on your working setup and the size of your home office, you can claim a percentage of household expenses like electricity, heating, and water. HMRC allows business owners to deduct these costs, which can quickly add up to a significant saving.
Can I Claim Part of My Home as an Office?
Yes, you can claim part of your home as an office if you use it for business purposes. According to HMRC, you must meet certain criteria to qualify, such as:
- Exclusivity of Use: While it’s beneficial if the space is dedicated solely to your business, it’s not a strict requirement. However, keep in mind that using a room exclusively for business may reduce the private residence exemption for Capital Gains Tax when you sell your home.
- Regular Business Use: The area of your home claimed as an office should be used regularly to carry out your work or business. It shouldn’t just be an ad-hoc or casual workspace.
- Evidence of Costs: You will need to retain accurate records of the costs you claim, such as electricity and water usage, to justify your deductions.
What Can I Claim for Using My Home as an Office?
When claiming your home office, there are specific expenses HMRC allows you to deduct. These include:
- Utility Bills:
- A proportion of electricity, gas, and water used for your business activities.
- Heating and lighting specifically for your work area.
- Internet and Phone Costs:
- Charges for business-related use of your phone and broadband.
- Office Furniture:
- Desks, chairs, and storage specifically used for your workspace.
- Stationery and Office Supplies:
- Paper, pens, printers, or any tools directly linked to your work activities.
It’s essential to only claim the portion of these expenses that relate to your work. For example, if half of your internet usage is for personal reasons, you can only claim the other 50% for business.
Can You Deduct a Portion of a Room for a Home Office?
Yes, you can apportion part of a room as your home office. If, for instance, you work on one side of your dining table, you can claim a proportion of the overall room expenses based on the workspace you use.
Quick Example:
- Total area of your home = 200m².
- Area used for work = 10m².
- Percentage claimed = 10m² ÷ 200m² = 5%.
You can then deduct 5% of your relevant household expenses for your home office.
How to Calculate the Use of Home as Office in the UK
HMRC offers two main methods to calculate how much you can claim for using your home as an office:
Flat-Rate Method
The flat-rate deduction is a simplified option designed to save time. You don’t need to keep detailed records; instead, you can claim a set monthly amount depending on your work hours:
- £10 per month for 25–50 hours worked.
- £18 per month for 51–100 hours worked.
- £26 per month for over 100 hours worked.
This can be a quick solution for those with minimal expenses but might not cover all costs effectively for others.
Proportional Costs Method
Self-employed professionals often benefit more from calculating actual expenses for a more accurate claim. Here’s how to do it:
- Measure the area (in square metres) of the space you use for work and calculate its percentage relative to your home’s total size.
- Divide utility bills (electricity, water, internet, etc.) in proportion to the hours and volume of business use.
- Keep detailed records, such as receipts and logs of working hours, to validate your calculation.
Important Note: If you use a room exclusively for business purposes, you risk a potential Capital Gains Tax implication. It may be advantageous to occasionally use the space for personal activities, such as turning your home office into a reading nook during non-business hours.
If you would like to learn more about £312 for working from home expenses, read here.
Frequently Asked Questions
Can I Claim the Cost of a Desk for Working from Home?
Yes! HMRC allows you to claim office furniture costs like desks and chairs as part of your business expenses. Just ensure they’re genuinely used for work purposes and that you keep all receipts.
How Much Can I Claim for Using My Home as an Office in the UK?
The amount depends on whether you choose the flat-rate method or calculate actual expenses. For detailed calculations, refer to the methods outlined above.
To learn more about how much you can claim using your home address as office read here
Can HMRC Reject My Claim for a Home Office?
Yes, HMRC may reject claims if appropriate evidence or calculations isn’t provided. For example, if you claim travel expenses but fail to keep receipts or records of the journey, HMRC could disallow the claim. It’s essential to keep all your records and stay within the allowable expenses outlined by HMRC.
Maximise Your Savings With Debitam
Claiming part of your home as an office might seem complex, but understanding the rules can significantly reduce your tax bill. At Debitam, we make the process hassle-free for self-employed individuals and small business owners by providing expert guidance tailored to your unique situation.
Want to maximise your savings while staying compliant with HMRC? Contact Us today and start your home-business adventure with confidence. Together, we’ll brew the perfect recipe for success.
