How to Claim Home Office Expenses as a Director: Bedford Accountants Share Their Secrets

Many directors I speak to assume claiming home office expenses is complicated, risky or not worth the effort. The opposite is true. If you work from home, even part time, your personal costs increase. You use more electricity, heating, water, broadband and space. HMRC understands this which is why the rules exist. The key is knowing how to apply them properly so you reduce your corporation tax without claiming anything you shouldn’t.

In my opinion home office claims are one of the most straightforward, most underused and safest tax deductions available to small Bedford companies. The real problem is poor advice. When new clients join us I can see immediately that their accountant simply ticked the £6-per-week box without ever explaining that there is a much better method for many directors. Once we sit with them and walk through the numbers, they are genuinely shocked at how much tax they could have saved in previous years.

Let me explain each method clearly, the logic behind them, how HMRC views them and the mistakes I see time and time again.

The Two Methods Directors Can Use

Directors have two completely different options when claiming home office expenses: the flat rate and the actual cost method. Both are legal. Both reduce corporation tax. The right one simply depends on your situation.

The biggest mistake Bedford directors make is choosing the wrong one because their accountant never explained the difference. The second biggest mistake is assuming both methods produce the same result. They don’t. One method is simple but basic. The other requires more thought but can save far more money.

Let’s break them down properly.

The Flat-Rate Method

The flat rate is the simplest option. You do not need receipts, calculations or percentages. You simply claim £6 per week (£26 per month) as a business expense.

That’s it.

This method works well for directors who only work minimal hours from home or who want a clean, unquestionable deduction with no admin. It is also the safest choice if you rarely use your home for business or only carry out occasional admin tasks.

However, after years of reviewing accounts for Bedford clients, my honest opinion is that most directors claim this because they were never told there was an alternative. It is not that the flat rate is wrong. It’s that most directors are entitled to more.

If you genuinely only do light work from home then this is perfect. If you spend meaningful hours working from home, the flat rate is usually the lesser option.

The Actual Cost Method

This is where a good accountant makes a real difference. The actual cost method allows you to claim a percentage of your real household expenses. This includes some of your heating, electricity, broadband, phone costs, water (in certain cases), home working equipment and even a portion of mortgage interest or rent depending on how the space is used.

This method requires proper calculation and the director must show how the percentage was reached. The simplest way is to look at:

• The number of rooms in the house
• The room used for work
• The percentage of time that room is used for business

For example, if you have a five-room home and you use one room for business 40 percent of the time, your allowable percentage becomes eight percent of that cost. When you multiply this by your household bills the numbers surprise people.

I’ve seen directors claim hundreds of pounds per year through this method. In some cases, where a director works from home full time, the claim is significantly higher. The key is making sure everything is justified and reasonable. HMRC is not looking to catch you out. They simply want a logical breakdown of how you reached your percentage.

The actual cost method gives you a much fairer representation of your true working-from-home costs and, in my experience, is the method most directors should at least consider.

What About Mortgage Interest and Rent?

This is one of the most misunderstood parts of home office claims. You cannot claim your full mortgage payment. Mortgage repayments are made up of capital and interest, and only the interest portion is allowable. Rent can also be claimed proportionally if you rent your home.

Where people run into trouble is when they claim too much or attempt to claim for space that is also used personally. Your workspace must not be exclusively used for personal reasons when you are claiming the cost under this method. Bedrooms used only as offices or dedicated home offices are the cleanest examples.

This is why we always walk clients through this in detail before making a claim. Done correctly, it saves tax. Done incorrectly, it creates risk.

Broadband and Mobile Phones

Broadband is essential for almost every business. If your broadband is used for both business and personal purposes, you can claim the business proportion. If your company pays for a separate connection exclusively for business, that is even cleaner.

Mobile phones have an extremely generous rule for limited company directors. If the company takes out the phone contract, it is 100 percent allowable and tax free. There is no benefit-in-kind as long as the contract is in the company name. In my opinion this is one of the easiest wins available to directors and one that almost everyone should take advantage of.

Claiming Office Furniture and Equipment

This is another area where people misunderstand the rules. If your company buys equipment such as desks, chairs, monitors, keyboards, storage or lighting, these can usually be claimed as business assets. If you buy equipment personally and the company reimburses you, it is still allowable as long as the expense is wholly and exclusively for business use.

Many directors hesitate to buy proper equipment because they think it will look suspicious. The opposite is true. HMRC expects directors to have proper equipment if they work from home. In fact, not claiming office equipment looks more unusual than claiming it.

The Mistakes I See Bedford Directors Make Every Year

After fixing hundreds of home office claims, I can tell you exactly where most directors go wrong. The three biggest issues are not claiming enough, claiming the wrong items and having no supporting explanation.

Some directors claim nothing at all out of fear. Others claim the wrong broadband or incorrect mortgage amounts. Some use the whole home as an office which creates issues for capital gains tax. Some use the actual cost method but cannot explain how they reached the percentage.

HMRC is not unreasonable. They simply want consistency and logic. Every claim should be backed by a simple explanation. When we handle this for clients our goal is to maximise the claim while keeping everything watertight.

Which Method Should You Use?

This depends entirely on the way you work. If the work you do from home is minimal or you want a fast, risk-free claim, the flat rate is perfect. If you work from home regularly or your personal bills are significantly affected by your business activity, the actual cost method will almost certainly save you more money.

In my experience, the best way to choose is to calculate both and compare. Most directors are surprised at how much more they can claim under the actual cost method once we run the numbers.

The Bottom Line for Bedford Directors

Claiming home office expenses correctly is one of the easiest ways to reduce your corporation tax without any complicated tax planning. The problem is that most directors only ever receive surface-level advice and miss out on the bigger savings available.

When you understand the rules properly and apply them in a logical way, you can claim a fair portion of your real household costs and keep more money inside your business.

If your accountant has never explained these methods to you or simply ticks the £6-per-week box every year, you are almost certainly underclaiming. A good accountant should walk you through both options, show you the numbers and let you make an informed decision.

If you want to, I can now write a full comparison calculation example (flat rate vs actual cost) to include in this article.