How to claim home office expenses as a sole trader

If you’re self-employed, you can claim for a wide range of expenses against your tax bill, although you have to be careful to only apportion costs which have been genuinely incurred in the running of your business. Here is how to claim home office expenses as a sole trader.

Sole trader home office expenses are different from company directors

If you’re a limited company director, you only have scope to claim a limited number of household expenses against your company’s tax bill (heating, electricity and business telephone use being the main ones).

Sole traders (the ‘self-employed’), on the other hand, can claim a proportion of almost all household expenses against tax – if you run your business from home.

We will take a look at some of the most commonly claimed home office expenses here.

The basic rules

As with all types of expenses, the golden rule is that any costs you claim for must have been genuinely incurred in the course of running your business.

When working out how much of your household expenditure could be fairly reclaimed for business use, HMRC states: “It will normally be appropriate to apportion these expenses by area and time.”

What can you claim for?

Some of the most common household expenses you can claim a proportion of include:

• Mortgage interest (you can’t claim for the capital repayment element of a mortgage)
• Rent
• Council Tax
• Water
• Electricity
• Heating
• Home insurance (if it also covers your business)
• Repairs
• Cleaning costs

For a full list, read HMRC BIM47820 which deals with specific deductions for the use of the home by the self-employed

How do you work out the proportion of household expenses to claim for?

If you’re self-employed, you can claim back some of your home working costs if you use a “reasonable” method to calculate the total amount.

Here is a well-proven method, as used by FreeAgent (see their handy infographic here, which sets out the steps nicely).

The steps, roughly, are as follows, with an example:

1. Count the number of rooms in your house (7 in this example)
2. How many of these rooms do you use for work? (2 – the living room, and an office).
3. How long do you use these rooms each day (percentage)? (living room 10%, office 80%)
4. Divide each bill by the number of rooms in your house (e.g. £490 annual electricity bill, divided by 7 rooms = £70 per room)
5. Multiply the bill’s room cost by the percentage of the day that room is used for business purposes (living room = 10% x £70, office = 80% x £70)
6. So, for the electricity bill, your total claim using this method is £7 (living room) + £56 (office) = £63
7. Repeat this step for each household bill you want to claim against.

HMRC has provided several examples of how to apportion household expenses to your business in BIM47825.

Further Information

Don’t forget, different home office expenses rules apply to limited company directors (and employees). You can find out more here.

More on calculating your home working expenses and sole trader accounts.