Expenses, and an office from home

Paula Veysey Smith • 8 February 2018

An office from home – how to get the most from expenses allowed

So, whether you convert your loft or have some office space in a room many of us are now opting to work from home. Any why not, there are great benefits to be had and it also means that the coffee round is always only for one! I am often asked about what expenses can be claimed for someone working from home so here’s a look at what you can do and what to avoid.

HMRC has provided a simplified method, where you count up the number of hours you work each month and use the HMRC’s simplified expenses rates for sole traders – please see the below:

Hours per month: Flat rate per month:
25 to 50 £10
51 to 100 £18
101 or more £26

OK – well don’t spend it all at once!

The key issue here is keeping a record of the hours you work and you will inevitably have worked more hours than you think as with an office at home you do tend to pop in and just respond to that email or check over that work issue. So, although using this simplified method may sound appealing you won’t get the most from your expenses and for just a little more work you will be able to recoup far more from your office at home. And note – the table is for sole traders! Those operating through a Ltd Company, you need to read the next bit carefully.

The other method is known as the Proportional Cost Method, and it’s not as scary as it sounds.
You need to work out what the actual running costs of your home are. If you own a property this can include mortgage interest but not capital repayments. If you rent then it is simply the rental charge. Other costs which you need to record include gas, electricity, insurance, service charges, cleaning and council tax.
You then need to work out what proportion of these costs would be fair to allocate to your business. The simple way of doing this is to firstly work out how many rooms you have in your house excluding bathrooms, kitchens and hallways. You then need to work out what % of the time you use one of the rooms for business use. I know it sounds like a bit of work, which it is, but once it’s done you’ll only need to review it once a year to check it is still accurate.

However, it is important that you don’t use your office room entirely for business – keep at least a small element of the room for personal use as this protects you from any potential capital gains tax issues when you sell your house.

If you are a Ltd Company I would also recommend putting an agreement in place between you and your company for the use of the office and the amount to be paid. This does protect you if the taxman cometh. So, if you are operating through a Ltd Company then you really will only be able to use this method of apportioning costs.

This is quite a complex area so please do contact us if you need to look at how to claim the correct expenses for your office at home.

Next week I’m going to plunge into GDPR (General Data Protection Regulations). Although not specifically an accounting issue it is going to affect every business in the UK so some level of understanding is essential. I cannot stress how important it is to understand this new regulation as compliance is due by the 25th May – oh, happy days!

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Working from home

Working from Home Expenses You Can Claim in 2025–26

by Paula Veysey-Smith • 22 May 2025
Do you work from home? If you do, either full-time or part-time, you may be eligible to claim certain expenses either against your own taxes or your Limited Company ones. Many factors will determine what you can claim such as working location, employment status (employee, self-employed, company director), and how much of your home is used for work. What can I claim as an employee of a company? You can claim: A flat-rate allowance of £6 per week (or £26 per month) without needing to provide evidence of expenses. This is the simplest method and can be claimed via your tax code or tax return. The actual costs (if you don't use the flat rate) which can include a proportion of the following: Heating and electricity Internet and phone bills Water (if it’s metered and usage is clearly work-related) You cannot claim rent or mortgage interest unless you're self-employed. These expenses can be claimed via HMRC’s online portal if they have not already been reimbursed by your employer! What can I claim if self-employed (sole trader or via a Partnership)? Here you have two options: 1. Simplified Expenses (Flat Rate) Based on hours you work from home each month: 25–50 hours/month → £10/month 51–100 hours/month → £18/month 101+ hours/month → £26/month 2. Actual Expenses Method You can claim a proportion of: Rent or mortgage interest (not capital repayments) Utilities (gas, electricity, water) Council tax Internet and phone Cleaning and maintenance Home insurance (if work-related) You’ll need to work out the percentage of your home used for business, usually by the number of rooms (not including bathrooms, corridors, storage space) or square footage. One word of warning is never claim the whole use of a room for business as every room will have duality in use. This is also important if you own your home as a room declared purely an office could attract Capital Gains Tax when the property is sold. We suggest that any room should only be claimed at 90% for business. And only one room can be used, not a multiple! These costs should be included on your Self-Assessment tax return. Can I make a claim for these expenses in my Limited Company? Yes, you most certainly can. At MPower Accounting we not only recommend using the actual expenses method as set out above, we provide our clients with a bespoke spreadsheet to calculate these expenses, and others such as mileage, on a month-by-month basis. These amounts can then be claimed as expenses to the Company and paid out to you. It is one of the tax efficient methods of taking money from your business. Capturing and calculating monthly your regular working from home expenses is the best way of ensuring they are recorded correctly. To help you do this we are offering a free download of the spreadsheet usually only available to our clients; please use the link below to get this. Paying taxes is a necessary evil but I am a firm believer in minimising this liability for both individuals and companies. Correctly claiming working at home expenses is one way to reduce your tax bill. Please do contact us if we can help you further identifying all the expenses you can claim and also for further assistance in how to correctly use and populate the downloaded template.

Tax Efficient Salary for Directors in 2025-26

by Paula Veysey-Smith • 28 April 2025
Key changes in Employer National Insurance (NI) rates and thresholds for the 2025-26 year have meant advice on the tax efficient salary for Directors has significant altered.
A box of receipts sits on a desk next to a lamp and calculator - Making Tax Digital

How will I be affected by Making Tax Digital for Income Tax (MTD for ITSA)?

by Paula Veysey-Smith • 23 March 2025
HMRC are starting to send out letters to sole traders and landlords in the initial steps towards Making Tax Digital for Income Tax. If you receive one of these letters do not panic, help is at hand. So let’s answer your most asked questions about Making Tax Digital. What is Making Tax Digital for Income Tax? Making Tax Digital for Income Tax (MTD for ITSA) is a UK government initiative aimed at modernising the tax system. It will require individuals and businesses to keep digital records and submit tax information to HMRC using compatible software. It is part of a broader initiative to digitalise tax returns and follows on from the changes already implemented for VAT reporting. Will Making Tax Digital affect me? MTD for ITSA will affect individuals who: Are self-employed (e.g. sole traders) and/or landlords (earning income from property). Have a total income over £50,000 per year (combined from self-employment and property). Are currently required to complete a Self-Assessment tax return. From April 2026 , MTD for ITSA will be mandatory for those earning over £50,000. From April 2027 , this threshold will reduce to £30,000. What will I have to do if my earnings are over the threshold? You will need to keep digital records for income and expenses which will mean using MTD compatible software. This will be a major change for those of you still keeping paper records. Instead of submitting an annual self-assessment return you will need to submit quarterly updates 4 times a year to HMRC. At the end of the tax year an End of Period Statement (EPOS) and a Final Declaration will need to be submitted which essentially replaces the current Self-assessment return. All of these will be required digitally, paper records and manual calculations will no longer be accepted. This means that instead of 1 annual return you will need to make 6 submissions! So what software do I need to use to keep digital records? Acceptable software include: QuickBooks Xero FreeAgent Sage or, HMRC-recognised spreadsheet tools with bridging software ( not highly recommended ) No more shoeboxes of receipts or manual books — everything must be digitally recorded. When will I need to register for MTD? You’ll need to sign up for MTD for ITSA before April 2026 . This is a deadline and not a target, signing up early is always advisable. HMRC will provide a service for you to do this but having the guiding hand of an accountant will make this a much easier task.
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