Claiming for Working from Home Without Overdoing It

There is a flat rate that takes thirty seconds and an actual-cost method that usually claims more. There is also a way of doing it that costs you money when you sell the house.

Working from home is a legitimate business cost and one of the most under-claimed. It is also the one where people most often either claim a number they cannot justify, or accidentally create a Capital Gains Tax problem for themselves years later.

The simple way

HMRC's simplified expenses give a flat monthly amount based on hours worked from home:

Below 25 hours a month you cannot use the flat rates at all. At the top band the claim is £312 a year, and it takes about thirty seconds of work.

Note what it does not cover: telephone and internet. Those are claimed separately on the business proportion of actual use, on top of the flat rate.

The accurate way

You can instead work out the real business share of running the house, and for most people it produces a larger figure. The costs available include heating, lighting, water, home insurance, and rent or the interest element of a mortgage — not the capital repayment.

Apportionment is usually done on two dimensions at once: how much of the house, and how much of the time. A five-room house with one room used for work for half the week gives one fifth of the costs, halved. Whatever basis you choose, write it down, keep it sensible, and apply it consistently. An explained method is what makes a claim defensible; a round number is what makes it a target.

The exclusive-use trap

This is the part worth reading even if you claim the flat rate.

When you sell your main home, private residence relief normally exempts the whole gain. But if part of the property has been used exclusively for business, that proportion of the gain can fall outside the relief — and on a house that has risen in value over a decade, the sum at stake dwarfs anything you saved on the annual claim.

The fix is straightforward and almost always true anyway: keep some private use of the room. A home office that is also where the ironing gets done, or where a guest sleeps at Christmas, is not in exclusive business use. Claim the business proportion of a room used for both, and the relief on your home stays intact.

Getting help with this

AJH Accountants handles expenses for clients across the UK. We deal with HMRC, tell you what you can claim, and file on time, so nothing rests on you remembering a deadline. See how the service works, ask for a fixed-fee quote, or call the office on 01204 840303.

Originally published at ajhaccountant.co.uk/blog/working-from-home-expenses-self-employed.