Yes – you can reclaim VAT on certain bills if you work from home, but only if your business is VAT-registered. The bill has to be for running your business, and if it covers both home and work use, you can only claim the business share.
So, let’s say your home office takes up a fifth of your floor space: you could reclaim a fifth of the VAT on qualifying bills.
Below, we cover which bills count, how to work out your share, and how to claim it on your VAT return.
Claiming VAT on bills when working from home
You can reclaim VAT on certain costs when working from home, provided your business is VAT-registered. The cost just needs to be directly related to running your business – even if it’s only part of the full bill or expense.
For example: You have five rooms in your house, and your home office is one of them, so your home workspace takes up roughly 20% of your floor space. This means you can reclaim VAT on 20% of applicable bills and expenses.
Plus, if your business incurs additional costs as a result of you working from home, whether partially or full-time, you can reclaim the VAT on these too, along with a proportion of your home workspace running costs.
This includes things like:
- Office furniture (for example, a new desk chair you’ve purchased)
- Some decoration costs
- Security expenses associated with protecting sensitive data
- Some office cleaning and maintenance costs (for instance, the business percentage of the VAT on a cleaner’s bill)
You will need to be able to prove that the costs you’re looking to reclaim VAT on are a ‘fair and reasonable’ part of running your business. The best way to do this is by maintaining thorough financial records and storing valid VAT invoices, receipts, and other relevant paperwork.
How do I reclaim VAT on work-from-home expenses?
You can claim VAT on allowable expenses through your VAT submission, but there are a few specific things to know depending on how your business is structured.
Sole traders and partners
If you’re a sole trader or partner, you and your business are treated as one and the same by HMRC, so there’s no separate company footing the bill. You just need to be able to show what share of each cost is for business use.
Don’t forget: To reclaim VAT on home bills, you need to be VAT-registered. This applies no matter how your business is registered or legally structured.
Limited companies and directors
If you run a limited company, the rules are a little stricter. Your company is a separate legal entity from you, so to reclaim VAT on home-working costs, the expense needs to be paid by the business and in the business’s name.
If you’ve covered a cost personally, the company can reimburse you as a director. Just keep the VAT invoice and a clear record of the business use.
Registering for VAT
You must register for VAT if your taxable turnover goes over the £90,000 threshold in any 12-month period, or if you expect it to.
You can register online or by post, and it’s a quick job – you just need your:
- Government Gateway login details
- Business registration details
- Business bank account details
- National Insurance number or Unique Taxpayer Reference (UTR)
You can also register voluntarily before you reach the threshold, but it’s worth speaking to your accountant first, as it means charging VAT and filing returns.
Voluntary VAT registration
As we’ve mentioned – you don’t have to wait until you hit the £90,000 VAT threshold. Some business owners register voluntarily, and the main reasons are:
- Reclaiming VAT on your costs. If you pay VAT on things like accountancy or legal fees (known as ‘input tax’), you can claim it back once you’re registered.
- Getting money back overall. If your input tax is higher than your ‘output tax’ (the VAT you charge your customers), you can reclaim the difference. So, if you pay VAT often but rarely charge it, registering can be a more tax-efficient move.
- Looking more established. Being VAT-registered can make a business seem bigger and more reputable, which helps you stand out.
- Backdating claims. If you’ve kept detailed records, you can claim VAT on goods bought up to 4 years before you registered (as long as you still have them, or they went into something you still have), and on services up to 6 months before.
In other words – voluntary registration is your choice, but it doesn’t get you off the hook with VAT returns. You’ll follow the same processes and deadlines as any other VAT-registered business.
If your VAT taxable turnover is still below the threshold and there’s no real reason to register, you might prefer to save yourself the headache for now.
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