If you’re running your business from home, whether it’s your living room, spare bedroom, or kitchen table, it’s essential to understand how your home setup can help you save on taxes.

In this guide, we’ll walk you through what you can claim, how to calculate it, mistakes to avoid, and tips to get the most out of your home office deductions.

What are home office expenses?

Home office expenses are the costs of running your business from home. This includes expenses related to managing admin, delivering services, or marketing products from a dedicated workspace. You can claim a portion of these costs to reduce your taxable profits.

Typical home office expenses you can claim for include:

• Heating and electricity
• Internet and phone bills
• Office supplies like stationery and printer ink

You cannot claim home office expenses for:

• Being on call or simply available for work
• Storing business items at home
• Completing your tax return
• Reporting earnings for universal credit

In short, the cost must directly support your day-to-day business activities.

How do you calculate home office expenses?

There are two main ways to calculate your home office expenses: using simplified expenses (a flat-rate method) or calculating your actual business costs. Let’s explore both options so you can choose the one that suits your setup.

Simplified expenses

You can use HMRC’s simplified expenses method if you work more than 25 hours a month from home. This approach uses a flat monthly rate based on your work hours from home, so there’s no need to calculate individual bills.

The flat rate covers general household running costs, but phone and internet bills are not included. These can be claimed separately based on actual business use. This method is quick and ideal for those with minimal home office use.

You can claim the following flat-rate allowances:

• £10 per month if you work 25 to 50 hours from home
• £18 per month if you work 51 to 100 hours
• £26 per month if you work more than 101 hours

How to calculate:

If you worked 35 hours per month from home for 8 months, and 75 hours for the remaining 4 months.

• For 8 months of 35 hours: £10 × 8 months = £80
• For 4 months of 75 hours: £18 × 4 months = £72
• Total claim: £80 + £72 = £152

You can use HMRC’s simplified expenses checker to see whether this method gives you a better deduction than actual costs.

Actual business costs

If you feel your work-from-home costs are higher than the flat-rate allowance, you can choose to claim based on your actual expenses. This method involves calculating the proportion of your home used for business and applying that percentage to your household bills.

How to calculate:

Let’s say you live in a 3-room house and use one room exclusively as your office. Your electricity bill is £60 for the month.

• 1 room out of 3 = (£60 divided by 3) = £20 of the bill
• If you worked every day that month: £20 ÷ 30 days = £0.67/day
• Multiply £0.67 by the number of days you worked to get your monthly expense

While this method requires more record-keeping, it could result in a higher claim, mainly if your home office is used regularly and for long hours.

How to maximise your home office expenses claim

Here are some practical tips to help you claim accurately to ensure you’re not missing out on potential savings.

Keep organised records

From the outset, stay organised by keeping detailed records. This includes:

• Receipts for home-related bills
• Breakdown of your business vs personal usage
• A working hours log (if using simplified expenses)
• Notes on which rooms are used for business

This documentation will come in handy if HMRC ever asks for evidence.

Reassess your claim annually

Reviewing your claim each year is essential, as your work patterns may change. For instance, you might start using a co-working space more frequently or add more rooms in your home for business purposes.

Be sure to compare both calculation methods annually to ensure you’re claiming the maximum allowable deduction.

Don’t miss out on other eligible expenses

You can claim more than just rent and utility bills. Some other expenses you can claim include:

• A portion of mortgage interest
• Council tax (if used for business)
• Broadband and telephone (if partially used for work)
• Repairs and maintenance for the work area

Just make sure the expense is genuinely business-related. For shared services like the internet, only claim the portion used for work.

Common mistakes to avoid when claiming home office expenses

Even well-intentioned founders can get tripped up by small mistakes. Here are the ones to watch for:

• Over-claiming costs shared: If you claim 100% of your broadband bill but also use it for personal purposes (like Netflix), HMRC may question this.
• Forgetting allowable expenses: Many overlook claims for costs like council tax or business-related insurance. Don’t miss these eligible deductions.
• Not keeping adequate records: Without proper documentation, it can be difficult to defend your claim if HMRC asks for proof.
• Choosing the wrong method: While the flat-rate system is convenient, if your actual expenses are much higher, you could leave money on the table by incorrectly calculating them.

A little attention to detail can help you avoid these common mistakes and ensure your claim is accurate.

Conclusion: Claiming home office expenses with confidence

Working from home can be a smart and flexible choice for your business, and the right approach can help reduce your tax bill.

By understanding what qualifies, choosing the best calculation method for your situation, and keeping good records, you can confidently claim your home office expenses and reduce your tax bill.

At Jump Accounting, we specialise in accounting and advisory services to support founders like you. Whether you need financial guidance or expert advice to optimise your claims, we’re here to help.