I often get asked by clients and readers: “Which home-office costs can I actually claim, and how do I work out the amounts?” Working from home has become commonplace, but the rules for claiming home-related business expenses — and the practical ways to calculate them — still confuse many small business owners. Below I walk through what’s allowable in the UK, the two main methods to calculate relief, practical examples, record-keeping tips and some common traps I see in practice.
What types of home costs can you claim?
Broadly, the costs you might be able to claim fall into two categories: direct business costs and shared household costs. You can claim:
Capital items like desks or computers are treated differently: they’re usually claimed through capital allowances (or the Annual Investment Allowance where appropriate) rather than as a straightforward expense. Repayments of mortgage capital are not allowable as an expense — but the interest element may be claimed for landlords and some sole traders in specific circumstances.
The two main ways to claim: Simplified expenses vs actual costs
There are two common approaches to calculating how much of your shared household costs you can claim as business expenses:
When simplified expenses are best
I recommend simplified expenses when you:
Simplified expenses are particularly handy for new businesses or sole traders who want to keep bookkeeping tidy. If you use software such as Xero or QuickBooks, you can still log the flat-rate amount as a single monthly or annual expense.
When to use the actual cost method
I advise using the actual cost method when:
This method is more accurate and may result in a larger allowable deduction — but it also requires better records and defensible apportionment.
How to calculate actual costs — a simple step-by-step
Here’s the approach I use with clients when they choose the actual cost method:
Example table to illustrate:
| Item | Annual cost | Business % | Allowable amount |
|---|---|---|---|
| Electricity & gas | £1,200 | 20% (space) × 50% (time) = 10% | £120 |
| Internet | £360 | 60% business use (heavy online work) | £216 |
| Council tax | £1,500 | 10% | £150 |
| Rent | £12,000 | 10% | £1,200 |
| Office desk (capital) | £300 | 100% (capital allowances) | Claim via AIA or capital allowances |
Record-keeping: what I always recommend
Whether you use simplified expenses or the actual cost method, keep good records. That’s the single most important piece of tax advice I give. Records should include:
If HMRC ever asks for evidence, having a clear spreadsheet, backed up by scanned bills in Xero or QuickBooks, makes the process straightforward.
Common mistakes I see
Clients sometimes over-claim by:
Another recurring error is double-claiming: for example, splitting a phone bill between your company and a personal claim in another context. Be consistent and conservative — if in doubt, document your rationale.
How to claim on your tax return
For sole traders, include the allowable amount under business expenses on the Self Assessment. If you operate through a limited company and pay yourself rent for a business-use room, other rules apply: the company can pay a reasonable amount of rent and the individual must include it as income — this is where mutual agreement and good contracts help. If your business is limited company-based and you incur the costs personally, you can also consider reimbursing through an expense claim from the company with supporting evidence.
If you use accounting software (I often recommend Xero or QuickBooks for my clients), set up a “Use of home as office” expense account and post the calculated amount each month. It keeps things tidy and simplifies year-end reporting.
Final practical tips I give clients
If you’d like, I can share a spreadsheet template I use with clients to calculate apportionments — or walk through a live example for your situation. Helping small business owners make clear, defensible claims is exactly the kind of practical support I offer at Muressaccounts Co.
