With the rise of remote and hybrid working in the UK, many employees and self-employed individuals are entitled to claim tax relief on expenses incurred while working from home. However, many miss out on these savings due to a lack of understanding of what can be claimed and how to do it. This detailed guide will walk you through the process of claiming tax relief on home office expenses, ensuring you keep more of your hard-earned money.
1. Who Can Claim Home Office Expenses?
Both employees and self-employed individuals can claim tax relief on certain home office expenses. However, the rules differ depending on your employment status. Employees working from home due to employer requirements can claim certain expenses, while self-employed individuals can claim a proportion of household expenses as a business cost.
2. What Home Office Expenses Are Eligible for Tax Relief?
Eligible home office expenses typically include:
- Electricity and gas – heating and lighting your workspace.
- Business phone calls – and a portion of your broadband if required for work.
- Water rates – if your business uses significant water at home (rare).
- Rent or mortgage interest – only for self-employed using the space regularly and exclusively for business.
- Office equipment and stationery – including desks, chairs, computers, and printer paper.
Employees can claim less than self-employed individuals, generally limited to costs incurred ‘wholly, exclusively and necessarily’ for work.
3. Tax Relief Options for Employees
Employees who work from home may claim a flat-rate deduction or actual costs incurred. For tax years 2020/21 to 2022/23, HMRC allowed a simplified claim of £6 per week (£312 per year) without needing receipts. For 2023/24 onwards, you can still use this flat rate if required to work from home.
If you have higher actual costs, you can claim the exact amount spent, but you’ll need to keep receipts and demonstrate that the costs are exclusively work-related. This is often more time-consuming and may result in smaller savings unless your expenses are substantial.
4. Tax Relief Options for the Self-Employed
Self-employed workers have two main ways to claim home office expenses:
- Flat Rate Simplified Expenses: HMRC allows a flat rate based on the number of hours worked at home each month (e.g. £10 per month for 25-50 hours, £18 per month for 51-100 hours, and £26 per month for 101+ hours).
- Actual Costs Method: You can calculate the proportion of household costs that apply to your home office, typically based on the number of rooms or floor space used for business purposes. Expenses can include a share of rent, mortgage interest, council tax, utilities, broadband, and more.
Choosing the right method depends on the complexity of your finances and the accuracy of your records.
5. How to Calculate Your Home Office Deduction
For the actual costs method, divide your eligible household expenses by the total number of rooms (excluding bathrooms and kitchens) and then apply that percentage to your business use. For example, if you have five rooms and use one as an office exclusively for work, you can claim 20% of relevant expenses.
Remember, the room must be used regularly and exclusively for business to qualify for tax relief. If it’s a shared space (like a dining table), it’s harder to claim full relief, but a portion may still be allowed.
6. Claiming Office Equipment and Supplies
Office equipment such as desks, chairs, and computers are eligible for tax relief if purchased specifically for work. For employees, employers should ideally reimburse these expenses, but if not, you can claim tax relief through your Self Assessment or by submitting a P87 form to HMRC. Self-employed workers can claim these as capital allowances or as expenses, depending on the item and usage.
7. How to Claim the Tax Relief
Employees: You can claim home office tax relief through:
- Self Assessment tax return if you already file one.
- Form P87, available on HMRC’s website, if you don’t usually complete a tax return.
Self-Employed: You claim home office expenses as part of your self-employment income and expenses section in the Self Assessment tax return. Use either the simplified expenses or the actual costs method, depending on your situation.
8. Keeping Records
Regardless of your method, keep detailed records of your expenses and how you calculated them. For actual costs, retain copies of utility bills, rent agreements, receipts, and a breakdown of the business use calculation. This is crucial in case HMRC asks for evidence during an enquiry.
9. Potential Pitfalls to Avoid
There are common mistakes to watch out for when claiming home office tax relief:
- Claiming for personal use areas like bedrooms that are not exclusively used for business.
- Forgetting to deduct only the work-related portion of shared expenses.
- Failing to adjust claims if working arrangements change (e.g. returning to the office).
Avoiding these mistakes ensures that your claims are accurate and that you avoid penalties from HMRC.
10. Seeking Professional Help
While many home office expense claims can be straightforward, complex cases—such as multiple income streams, high-value expenses, or mixed-use rooms—might benefit from professional tax advice. A tax advisor can help you maximize your claims and stay compliant with HMRC regulations.
Conclusion
Claiming tax relief on home office expenses is an effective way to reduce your tax bill and make working from home more affordable. By understanding what expenses are eligible, keeping accurate records, and choosing the best method for your circumstances, you can save money and avoid common pitfalls. Always stay updated with HMRC’s latest guidelines to ensure your claims remain valid and to take advantage of all the reliefs available to you.
