Working from home can make part of your household spending relevant to your business. The question is how to identify that business element and support the claim. The answer differs for a sole trader and a director of a limited company, so it is worth checking your structure before using an online example.
Working from home as a sole trader
A sole trader may be able to claim an appropriate share of costs such as heating, electricity, internet and council tax where they relate to business use. A reasonable calculation might consider the space used, the time it is used for work and whether a cost has a clear business element. Keep a note of the method and the bills behind it.
Some sole traders can instead use HMRC’s simplified expenses flat rate for working from home. That replaces a calculation for certain household running costs, but it is not a blanket allowance for every home-related cost. Compare the methods using your actual circumstances and check that you meet the conditions.
Working from home as a limited company director
A company director is not treated as self-employed merely because they own the company. The rules for expenses paid or reimbursed by an employer are different. Do not copy a sole trader’s percentage-of-household-bills calculation into a company return without checking the treatment. A formal arrangement, the nature of the expense and any personal benefit can all matter.
Records worth keeping
Record the hours and space used, keep relevant household bills and retain invoices for equipment purchased for the business. Separate a business-only cost from a mixed personal cost. If you buy a desk, computer or phone, the tax treatment may depend on who bought it, who owns it and how it is used.
Working from home also raises a practical question: is your home still mainly a home? Exclusive business use of a room can have wider consequences, so discuss unusual arrangements before making changes.
HMRC’s self-employed expenses guide and simplified expenses guide are good starting points. AA&R Certified Accountants can review your setup and help you make a supportable claim. Ask our team if you are unsure which approach fits your business.
Related reading: Claiming Business Expenses: A Practical Guide for Sole Traders.