Can You Expense Your Mortgage While Working from Home? Here’s What You Need to Know with TaxBert

As remote work continues to rise, more and more people are finding their homes transformed into their full-time office spaces. From tackling taxes to managing invoices, your home can serve as the new hub for productivity. The advantages are clear—no commutes, a comfortable workspace, and greater flexibility in your schedule. But working from home also comes with its own financial challenges. The increased use of utilities like broadband, electricity, and heating can quickly add up and raise household expenses. So, many self-employed individuals are asking, Can I expense my mortgage?

What Exactly Is an Expense?

In business terms, an expense refers to costs that are necessary for running your operations. When you’re working from home, these expenses might include things like:

The good news is, depending on your circumstances, you may be able to claim some of these expenses to reduce your tax liability. TaxScouts can help you identify which expenses you can claim as part of your tax return.

Can I Expense My Mortgage?

Unfortunately, no—mortgage payments themselves aren’t an allowable expense. Self-employed individuals who work from home can’t claim the full cost of their mortgage. However, the situation isn’t entirely bleak. Instead, you’re eligible for the Simplified Expenses system, which allows you to claim a flat rate of £312 a year as a deduction, simplifying your tax return if you don’t have complex expenses to report.

What About the Home Office Allowance?

The Home Office Allowance, part of the Simplified Expenses scheme, allows you to claim a portion of your household costs if you’re self-employed and use part of your home for work. The amount you can claim depends on how many hours you work from home each month.

How Do I Calculate My ‘Use of Home as an Office’?

To determine how much of your home expenses you can claim, you’ll need to calculate the percentage of your home used for work. For example, if you work 8 hours a day, 5 days a week, you would use 160 hours of your home each month. In a 30-day month, that’s 720 total hours, which means your work-related usage would be 22.2%. You can then apply this percentage to your mortgage interest payments to determine the amount you can claim.

Let’s break it down with an example:

This means you can claim 22.2% of your mortgage interest on your tax return, which in this case equals £5.32 per month or £63.84 annually.

What About Capital Gains Tax?

If you’re claiming a percentage of your home for business, be aware that this could affect your potential tax liability when you sell your property. Specifically, the portion of your home you’ve used for business might be subject to Capital Gains Tax (CGT) when you sell. If you claim the home office allowance for several years or for a significant portion of your home, this could increase your CGT exposure in the future.

Final Thoughts

In most cases, it’s likely simpler and more beneficial to opt for the simplified expense allowance of £312, along with your broadband costs, rather than attempting to expense your mortgage. However, if you have higher expenses—like renting a more expensive property—you may benefit from claiming a percentage of your mortgage interest. And if you’re renting, don’t worry about Capital Gains Tax; it only applies when selling an owned property.

With all this in mind, now that you know the ins and outs of expensing your mortgage, it’s time to decide: office or bedroom?