This Content Was Last Updated on May 17, 2023 by Jessica Garbett
If you work from home, for example lesson planning, administration, or occasional private clients, then you can normally claim a tax deduction.
There are differing rules for Self Employed – Sole Traders and Business Partners – and Employees, Including Company Directors.
Sole Traders and Partners
Under HMRCs “simplified expenses” regime, you can claim:
- £10 a month if you use your home between 25 and 50 hours a month
- £18 a month if you use your home between 51 and 100 hours a month
- £26 a month if you use your home more than 101 hours a month
Don’t worry if you don’t work 25 hours a month at home – you can still make a claim, but it has to be based on actual or estimated costs of working from home. HMRC may ask you to justify your calculation, but in practice its unlikely. In all honesty a fixed £120 a year is unlikely to cause problems, and HMRCs internal manuals specifically tell Tax Inspectors not to waste time checking small claims.
You can claim a business proportion of home phone/internet on top of these amounts.
Claiming Actual Costs
If you cannot use the standard allowances above, or feel your claim should be higher, then here is how to work out the actual costs:
Step 1 – Work out the costs of running your home, eg:
- Mortgage interest (not capital repayments)
- Council Tax
- Water Rates
Step 2 – Apportion this – there is no precise method of doing so, but as a rule use either the number of rooms (excluding kitchens, bathrooms and halls) or a floor area basis. If a room is shared, eg private study and business study then take this account into the apportionment.
HMRCs internal guidance on such claims is at BIM 47815 et seq:
HMRC: BIM47800 – Specific deductions: use of home: contents
Employees including Company Directors
You Voluntarily Work From Home
Your employer is allowed to pay you a £6 week/£24 month allowance if you have to work from home. The £6 p/w applies from 6 April 2020 onward, previously it was £4 p/w.
HMRC – Expenses and benefits: homeworking
If your employer doesn’t pay this amount, you cannot normally make any claim from HMRC for expenses yourself (this rule was relaxed for 2019/20, 2021-22, 2022-23 due to Covid).
Employers may want to consider paying this amount to staff who regularly home work.
You Are Required By Your Employer To Work From Home
Where you are required to work from the rules differ:
- Your employer is allowed to pay you a £6 week/£24 month as above
- Alternatively you can claim this amount from HMRC on your Self Assessment.
HMRC – Claim tax relief for your job expenses
- A larger amount can be paid / claimed, but it would have to be worked out on the principles below
A requirement to work from home could arise from your Contract of Employment, or because you are a Company Director and your home is the business base. However:
- Generally it should not be a matter of personal choice
- There should not be other facilities, eg an employers office within reasonable travelling distance that you could work from
- Substantive duties of the employment / directorship, not merely incidental ones, should take place at home
If you wish to claim actual expenses then the rules are:
- You can claim metered Gas, Electricity and Water – note you don’t need a separate meter but there must be extra units used as a result of working from home
- Costs of business telephone calls
- You cannot claim the whole or a proportion of Rent, Council Tax, fixed Water Rates, Mortgage Costs or Insurance
- Guidance on what can be claimed
HMRC: EIM32815 – Other expenses: home: household expenses: expenses that are deductible
- Guidance on what cannot be claimed
HMRC: EIM32820 – Other expenses: home: household expenses: expenses that are not deductible
Effect of claiming for Office at Home Expenses
Unless you have an area specifically dedicated for business use only, there should be no Capital Gains Tax or Business Rates concerns.
If you have people coming to the house, check with your insurers, and if relevant landlord or mortgage company.
For administration use only, planning consent should not be needed, and it almost certainly isn’t needed for an occasional business meeting.