How much can I claim for running my business from home?

How much you can claim for running your business from home has always been a hot topic for debate even before we all moved home to work!

Historically, the options were simple. You either took an HMRC approved payment of a few pounds for ‘non-exclusive use of home as office’, along with any expenses that were directly incurred; or you took a calculated payment based on the running costs for the entire property and the percentage of floorspace used for business.

Working from home expenses calculator

Whilst that sounds like a simple choice, the latter option was not that straightforward. The calculation used was not just based on the overall running costs and the space used. It considered the number of hours you used that space and whether it was also used for personal purposes too. Effectively if you had a square room in a square house that you dedicated to business use and never used it for anything else, you were fine. Anything else and it created a grey area. Whilst HMRC would explain what costs could be applied, there were no thresholds.

For many, it was far easier to take the basic payment and be safe than risk trying to push their costs through the calculator and get it wrong! 

Covid changed working from home

The Covid pandemic changed the work from home landscape overnight but after a few weeks employees and business owners alike realised that working from home costs!  

Companies found themselves paying for all of their traditional operating costs and having to fund tens or even hundreds of tiny satellite offices on top. But for the individuals working from home, the bills began to rise too. More time at home meant more utility costs, more coffee, more milk, more stationery costs.

HMRC had to clarify their policy on work from home expenses so that employees could be reimbursed but also claim for a proportional amount of their household running costs.

What expenses can I claim for running my business from home?

Whilst HMRC still expect that any claims are proportional and reflect the actual costs incurred for the household and the amount of time you spend working there, they appear to be more flexible on the method of calculation.

The key expenses you can use to calculate your running costs include:

  • Mortgage interest or rent
  • Council tax
  • Water rates
  • Insurance
  • Electricity
  • Gas
  • Cleaning
  • Broadband

You do still need an estimation as to hours worked and/or the proportion of these costs running the business requires directly, but it is become far less prohibitive to choose this route.

If you remain unsure, we recommend that you seek professional advice from an accountant or stick with the fixed fee for non-exclusive use, which ranges from £10 to £26 a month, subject to the hours worked.  Ultimately, whatever you claim be sure that you can evidence it with bills and receipts, in case of an inspection.

Based on search data to our website, this series of blog posts is designed to answer some of the most common ‘how to’ queries around setting up, running a company and managing your personal and commercial tax affairs. If there is a particular question you would like us to answer, please contact us today. Click here to view all the articles in this series.