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Home office expenses: a tax deduction guide for business owners

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Perhaps you’ve turned a spare bedroom into an office. Or, you could be storing stock in a shed you’ve got out the back. If you’re doing either of these, it’s likely that some of your household costs are overlapping with operational business costs.

The costs directly related to producing income for your business – which may include rent, mortgage interest, electricity, rates, insurance, and telecommunication bills – can all be recorded as business expenses. However, this all depends on you setting things up the right way.

How do we calculate your relevant home office expenses?

First, we need to understand the physical area of your home being dedicated to work.

You need to calculate the total physical area in the house that’s dedicated to business. Here’s an example:

  • The house has a total of 8 rooms
  • 1 of these rooms is used for storing stock for the business, 80% of the time it is used for this purpose, with the remaining 20% of the time it being used as a spare bedroom for guests. 
  • 1 of the rooms is used as a home office, 75% of the time it is used as a home office with the other 25% of the time it is used as a home gym. 
  • If my electricity bill is £200 I would be able to claim the following as a tax deductible expense:
    £200 / 8 rooms = £25 per room
    Room 1 used 80% of the time for business use: 80% * £25 = £20 
    Room 2 used 75% of the time for business use: 75% * £25 = £18.75
    Total tax deductible expense: £20 + £18.75 = £38.75

Alternatively, you could work out the proportion of the house used for business purposes on a square footage basis, rather than on the number of rooms.

This calculation can be applied to:

  • Interest on a mortgage, or rent
  • Insurance (both home and contents)
  • Rates (water and land)
  • Electricity and gas
  • Security and alarms costs
  • Internet
  • Telephone costs

Other, more specific expenses can also be claimed such as repairs and maintenance work on the areas designated for business.

There’s an easy way to claim what you’re owed

It’s as simple as keeping a record of your costs.

Save your invoices and bank statements to your Google Drive or keep a spreadsheet and your Beany accountant will review them when it’s time to prepare your financial statements. From there, we’ll work out what can and can’t be claimed!


Got any questions about Beany?

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Who are Beany? 

We’re an online accounting firm that is always right here for you, your accounting pain relief. The most advanced technology lets us work way more closely with you than a normal accountant world. 

We have a dedicated team of certified accountants and a support team to take care of your business no matter where you are, so you can focus on growing your business. We take out the ‘fluff’, break down the barriers and get things done. Looking out for you is what we are all about. Get started for free today.

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Tori Ma

Performance marketer

Performance marketer at Beany, and into true crime documentaries.

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