Ah, the joys of spring—the days are getting longer, the flowers are blooming, and oh look, your new council tax bill has just landed on the doormat, probably higher than ever! Just what you needed, right? With energy prices and household costs rising, every penny saved matters. The good news? If you run a small business from home, you might be able to claw some of that cash back from HMRC—legally, of course!
Can You Claim Business Expenses for Using Your Home?
If you own and manage a small business and regularly work from home, you could be eligible to claim a portion of your household costs as a business expense. This applies to:
Sole traders
Freelancers
Owner-managed limited companies
The way you claim depends on your business structure, but why pay for business costs out of your own pocket when HMRC allows you to claim a fair portion as a legitimate expense?
What Can You Claim?
You can claim a proportion of:
Rent or mortgage interest (not the full mortgage—nice try!)
Council tax
Electricity, gas, and water
Broadband and telephone bills
Repairs & maintenance (only for the business areas of your home)
Insurance (if it covers business activities)
How to Calculate What You Can Claim
HMRC won’t let you expense your entire house just because you send a few emails from the sofa, so here’s how to work it out:
1. Flat Rate Method (Sole Traders)
If you work from home for 25+ hours a month, HMRC offers a simple, flat-rate system:
25–50 hours/month: Claim £10
51–100 hours/month: Claim £18
101+ hours/month: Claim £26
Quick and easy—but might not maximise your savings!
2. Proportional Method
For a bigger tax break, work out how much of your home is actually used for business:
Count the rooms in your home
Work out what percentage is used for work and how often
Example: If you have five rooms and use one exclusively for work, that’s 20% of your household costs. If you only use it for business 50% of the time, you can claim 10% of your household expenses.
This method is often more beneficial for small business owners, particularly if a dedicated workspace is used regularly.
Tax Savings: Corporation Tax & Income Tax
For owner-managed businesses, claiming home office expenses can reduce tax liabilities significantly:
Sole Traders & Partnerships: Deducting home office costs lowers your Income Tax (20-45%) and National Insurance.
Limited Companies: Home office costs can be reimbursed tax-free or deducted as an expense, reducing Corporation Tax (saving 19-25%).
For a small business owner, these savings add up over the years, helping you reinvest in growth rather than overpaying HMRC.
Things to Watch Out For
Capital Gains Tax (CGT): If you claim part of your home solely for business, that portion may not qualify for Private Residence Relief when you sell. Keeping it multi-purpose (e.g., doubling as a guest room) helps avoid this.
HMRC Loves Records: Keep clear records of expenses and calculations—better safe than sorry!
Want to Save More Tax? Let’s Talk!
If you own and manage a small business, rising household costs shouldn’t eat into your profits more than necessary. If you’re unsure how much you can claim—or want to maximise your tax savings—drop us a message or book a free consultation today.
Let’s make sure you keep more of your hard-earned money where it belongs—in your business, not in the taxman’s pocket!