Making the Most of “Use of Home as Office” for Your Business

In today’s dynamic working environment, many business owners and self-employed individuals are using part of their home as an office. Understanding how to claim “Use of Home as Office” expenses effectively can help you save on taxes and optimise your financial management.

Here’s everything you need to know to make the most of this valuable deduction.

What is “Use of Home as Office”?

If you use a portion of your home for business purposes, you may be entitled to claim a percentage of your home expenses against your business income. This provision applies to self-employed individuals, freelancers, small business owners, and company directors who work from home.

If working as an employee, it’s important to note that you can claim tax relief if you are required to work at home, but not if you choose to or if your employer has an office, but it’s sometimes full and so you cannot attend.

Expenses You Can Claim

The expenses you can claim are calculated based on the proportion of your home used for business. Typically, this is determined by the square footage or the number of rooms used for work. 

Common expenses include:

1. Rent or Mortgage Interest: If you rent your home, you can claim a percentage of the rent. For homeowners, mortgage interest may be considered.
2. Utilities: Costs such as electricity, heating, and water.
3. Maintenance and Repairs: Costs related to the upkeep of your home, such as painting the office area.
4. Property Insurance and Taxes: A portion of your insurance premiums and council tax payments.

You should then consider the proportion of time that you are using the dedicated space for work purposes.

HMRC approved rate for Use of Home as Office “simplified expenses”

As an alternative to calculating the proportion of your household bills that you can claim relief for, you may choose to claim the HMRC approved rates which are based upon the number of hours that you work from home as follows: 

• 25-50 hours per month – £10 per month 
• 51-100 hours per month – £18 per month 
• 101 (or more) hours per month – £26 per month 

How to Calculate my claim for Use of Home as Office

To calculate the allowable expense, you need to determine the percentage of your home used for business. For instance:

• If your home has 5 rooms and you use 1 room as your office, 20% of your home expenses may be deductible.
• Alternatively, if your office occupies 200 square feet in a 2,000-square-foot home, you can claim 10% of the expenses.

Once you’ve established the percentage, you should then consider the proportion of time for which the room is used for business purposes and apply this to your total eligible expenses.

Record Keeping is Essential

To ensure your claims are accurate and accepted by HMRC, maintain detailed records. This includes:

• Utility bills, rent or mortgage statements, and repair receipts.
• A clear breakdown of how you calculated the business-use percentage.
• Documentation of business activities conducted in the home office, such as client meetings or remote work schedules.

Tips for Maximising the Deduction

1. Dedicate the Space: Clearly define the area used for work.
2. Review Annually: Your work-from-home setup and expenses may change over time, so reassess your claim annually.
3. Seek Professional Advice: Tax rules can be complex, and working with an accountant can help you maximise your deduction while staying compliant.

Conclusion

Claiming “Use of Home as Office” expenses can significantly benefit your business, reducing your tax liability and improving your financial efficiency. By understanding the rules, keeping meticulous records, and seeking professional guidance, you can confidently take advantage of this valuable deduction.

Need help with your personal or business accounting? Contact Munro Bowman today, and we’ll ensure you’re maximising all available deductions while staying compliant with tax laws. Let’s work together to make your home office work for you!